The NFIB Small Business Optimism Index reached its highest point of the year in June, hitting 91.5, a one-point increase from May. Despite this rise, the index remains below the historical average of 98 for the 30th consecutive month. Inflation continues to be the primary concern for small business owners, with 21% citing it as their most pressing issue, down slightly from May.
“Main Street remains pessimistic about the economy for the balance of the year,” said NFIB Chief Economist Bill Dunkelberg. “Increasing compensation costs have led to higher prices all around. Meanwhile, no relief from inflation is in sight for small business owners as they prepare for the uncertain months ahead.”
Key Findings from the June Report
The report highlights several trends affecting small businesses:
- A seasonally adjusted net 22% of owners plan to raise compensation in the next three months, up four points from May.
- A net negative 2% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in June, up six points from May’s lowest reading since October 1981.
- A net negative 2% (seasonally adjusted) plan inventory investment in the coming months, up four points from May.
- Fifty-two percent reported capital outlays in the last six months, down six points from May and the lowest reading since August 2022.
- Four percent of owners reported that all their borrowing needs were not satisfied, up one point from May and the highest reading since August 2022.
In June, a seasonally adjusted 37% of small business owners reported job openings they could not fill, down five points from May. Of the 60% of owners hiring or trying to hire, 85% reported few or no qualified applicants for the positions they needed to fill.
Despite the decline in hiring, labor costs remain a significant issue. A seasonally adjusted net 38% of owners reported raising compensation, up one point from May. Additionally, a net 22% plan to raise compensation in the next three months, up four points from May. Eleven percent of owners cited labor costs as their top business problem, while 19% cited labor quality, making it the second most pressing issue after inflation.
Fifty-two percent of owners reported capital outlays in the last six months, down six points from May. Of those making expenditures, 35% were spent on new equipment, 22% on acquired vehicles, and 14% on improved or expanded facilities. Twenty-three percent (seasonally adjusted) plan capital outlays in the next six months, unchanged from May.
A net negative 12% of all owners (seasonally adjusted) reported higher nominal sales in the past three months. The net percent of owners expecting higher real sales volumes was unchanged at a net negative 13%.
The net percent of owners raising average selling prices rose two points from May to a net 27% seasonally adjusted. Unadjusted, 12% reported lower average selling prices, while 41% reported higher prices. Price increases were most frequent in construction (55% higher, 5% lower), retail (49% higher, 8% lower), wholesale (46% higher, 17% lower), finance (38% higher, 7% lower), and services (37% higher, 9% lower) sectors. Seasonally adjusted, a net 26% plan price increase in June.
The frequency of reports of positive profit trends was a net negative 29% (seasonally adjusted), one point better than May, but still a very poor reading. Among owners reporting lower profits, 34% blamed weaker sales, 17% blamed the rise in the cost of materials, 12% cited labor costs, and 9% cited lower selling prices. For owners reporting higher profits, 37% credited sales volumes, 27% cited usual seasonal change, and 20% cited higher selling prices.
Four percent of owners reported that all their borrowing needs were not satisfied. Twenty-four percent reported all credit needs met, and 61% said they were not interested in a loan. A net 7% reported their last loan was harder to get than in previous attempts. Four percent of owners reported that financing was their top business problem in June, down two points from May.
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in June 2024.
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