Inflation Continues to Hold Down Small Business Confidence
Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Some Improvement Around the Margins, Yet Inflation Remains A Substantial Challenge
NFIB’s Small Business Optimism Index fell to the lowest level since May 2023 during February. Firms reported seeing improvements in terms of labor availability, while a lower share of firms raised selling prices during the month. Expectations for real sales and better credit conditions also notched improvements during the month. On balance, however, most other components slipped, notably hiring and capex plans. What’s more, the share of small businesses reporting inflation as the single most important operational problem rose during the month, overtaking labor quality at the top of the list.
Inflation Continues to Cut Into Small Business Confidence
- The NFIB Small Business Optimism Index fell to 89.4 in February. Although confidence has shown signs of improvement at various times, the headline index has mostly bounced around at a level well below the long-term historical average over the past two years
- The lack of meaningful improvement largely reflects ongoing challenges dealing with higher costs for materials, labor and financing. The share of small businesses reporting inflation as the single most important operational problem continues to be elevated and turned up further in February. Although inflation appears to be subsiding on trend, small businesses still appear to be having difficulties balancing the sharp rise in prices over past several years with slowing sales and uncertain future demand.