Small Business Optimism Dips to a 12-Year Low in April Labor Challenges Persist As Inflation Pressures and Credit Concerns Ease

Source: Economics Group of Wells Fargo Bank, N.A.


Firms Remain Pessimistic on the Economic Outlook

  • The NFIB Small Business Optimism index fell to 89 in April, the lowest reading since early 2013. For historical context, the headline index bottomed out at 91 in April 2020 during the first months of the pandemic. The index hit a record low of 79.7 in 1980 and fell to 81.6 in 2009 during the Great Recession.
  • While owners are becoming more pessimistic, April’s report should help allay concerns that credit is becoming completely unaccessible for small businesses.
  • After jumping in March, the net share of firms reporting that credit is harder to get fell by three percentage points to a reading that is generally on par with the average levels registered before recent banking sector volatility.
  • Signs that inflation is still on a downward trajectory were also evident. The net share of owners raising prices declined by four percentage points to 33%, the fifth straight drop. What’s more, the net percentage of firms indicating that they are planning to raise prices fell to 21%, which marks the lowest share since November 2020.
  • Furthermore, the net share of firms that reported raising compensation fell to 40% during the month. Despite trending slightly lower recently, April’s reading is still highly elevated. That noted, the net share of owners planning to raise compensation edged lower to 21%, which is in-line with pre-pandemic levels.