By Nathalie Voit
Optimism among small business owners has plunged to a new low, according to The National Federation of Independent Business’s (NFIB) Small Business Optimism Index.
The index fell for the third consecutive month to 93.2 in March, the lowest since April 2020. The index has typically averaged 98 throughout its 48-year history, NFIB said.
Poor sentiment among small business owners has been driven by inflation. Nearly one in three (31%) business owners identified high prices as the greatest challenge in their business, up five points from February and the highest reading since early 1981. Inflation has now replaced labor quality as the number one challenge facing small businesses, NFIB said.
“Inflation has impacted small businesses throughout the country and is now their most important business problem,” said NFIB Chief Economist Bill Dunkelberg in a press release published on April 12.
The number of owners raising average selling prices to compensate for rising costs rose four points in March to a new high of 72%, according to the survey.
Price increases were broad-based, with the wholesale sector reporting the most price hikes with 84% of owners implementing increases, followed by the construction (83% higher, 3% lower), agriculture (78% higher, 2% lower), and retail (77% higher, 2% lower) industries.
Half of business owners planned to raise prices in March, up four points from February.
Meanwhile, 22% of owners said labor concerns remained their top business problem, unaltered from February. There was a small one-point decline in the percentage of owners reporting job vacancies that could not be filled (47% in March vs. 46% in February). However, “the number of unfilled job openings remains far above the 48-year historical average of 23%,” NFIB said.
In addition to high costs and labor woes, 40% of owners said that supply chain disruptions have negatively impacted their business, up three points from the previous month. An additional 28% said supply chain problems posed a moderate impact on their business, and 23% reported a mild impact. Only eight percent of owners said their business was unaffected by the global supply chain crisis.
Overall, the March NFIB survey showed the share of owners expecting better business conditions over the next six months slipped by 14 points to a net -49%, the lowest level on record.
“With inflation, an ongoing staffing shortage, and supply chain disruptions, small business owners remain pessimistic about their future business conditions,” Dunkelberg said.
