Small business expectations of future conditions are at an all-time low

Owners report inflation as biggest business problem at highest since 1980

WASHINGTON, DC (July 12, 2022) – The NFIB Small Business Optimism Index fell 3.6 points to 89.5 in June, marking the sixth straight month below the 48-year average of 98. Small business owners who expected better business conditions over the next six months fell down seven points to a net loss of 61%. , the lowest level recorded in the 48-year survey. Expectations for better conditions have worsened month by month this year.

Inflation remains one of the biggest problems for small businesses. 34% of owners said this was their single most important issue in running their business, up six points from May and the highest level since the fourth quarter of 1980.

“As inflation continues to dominate business decisions, small business owners’ expectations for better business conditions have hit a new low,” he said NFIB Chief Economist Bill Dunkelberg. “In addition to the immediate challenges facing small business owners, including inflation and labor shortages, the outlook for economic policy is also not encouraging as policy talks have shifted to tax hikes and more regulation.”

Key findings include:

  • The net percentage of owners expecting higher real sales fell 13 points from May to minus 28%, a sharp decline.
  • Fifty percent of owners reported vacancies that could not be filled, down one point from May but very high historically.
  • The net percentage of owners raising average selling prices fell a seasonally adjusted three points to a net 69% after hitting a record high in May.

As reported in the NFIB’s Monthly Jobs Report, owners’ plans to fill vacancies remain high, with a seasonally adjusted net 19% planning to add new jobs over the next three months, but down seven points from May. Ninety-four percent of those who are hiring or attempting to do so said there were few or no qualified applicants for the positions they were trying to fill.

Fifty-one percent of owners reported capital expenditures over the past six months, down two points from May. Of those who did spend, 37% reported spending on new equipment, 23% on purchased vehicles, and 14% on upgraded or expanded facilities. Five percent purchased new buildings or land for expansion and 13 percent spent money on new fixtures and furniture. 23 percent of owners are planning capital expenditures in the next few months, down two points from May.

A net 2% decline in all owners (seasonally adjusted) reported higher nominal sales over the last three months, down three points from May. The net percentage of owners expecting real sales volumes fell 13 points to minus 28%.

The net percentage of owners reporting inventory increases fell three points to minus 4%. 39 percent said supply chain disruptions had a significant impact on their business. Another 30% report a moderate impact and 23% a mild impact. Only 6% say recent supply chain disruptions have had no impact.

A net 5% of owners considered current inventories in June to be “too low”, down three points from May and still surprisingly high. By sector, shortages are most commonly reported in manufacturing (19%), retail (18%), agriculture (18%), construction (16%) and non-professional services (15%). A negative net 2% of owners are planning inventory investments in the coming months.

The net percentage of owners raising average selling prices fell three points to 69% net (seasonally adjusted) from May. Price-raising activity has escalated over the past 12 months, reaching levels not seen since the early 1980s when prices rose at double-digit rates.

Unadjusted, 4% of owners reported lower average selling prices and 69% higher average prices. Price increases were most common in retail (80% up, 3% down), transportation (78% up, 0% down), construction (75% up, 4% down) and wholesale (69% up, 7% down). ). lower). Seasonally adjusted, net 44% planned price increases.

A net 48% (seasonally adjusted) said they would increase compensation, down one point from May. A net 28% of owners plan to increase compensation over the next three months, up three points from May and very high historically. Eight percent of owners cited labor costs as their top business issue and 23% said quality of work was their top business issue.

The frequency of reporting positive earnings trends was a net minus 25%, down one point from May. Of those owners who reported lower profits, 30% blamed increases in material costs, 16% weaker sales, 14% labor costs, 14% lower prices, 7% the usual seasonal change, and 2% blamed higher taxes or regulatory costs. Of owners who reported higher profits, 51% credited sales volumes, 19% cited higher prices, and 17% cited common seasonal variations.

One percent of homeowners indicated that all of their credit needs were not met. 27% said all credit needs were met and 61% said they were not interested in a loan. A net 3% said their most recent loan was more difficult to obtain than previous attempts. Only 1% said funding was their biggest business issue.

That NFIB Research Center has published data on Small Business Economic Trends with quarterly surveys since April 4th Quarter 1973 and monthly surveys since 1986. Survey respondents are drawn at random from NFIB membership. The report is released on the second Tuesday of each month. This survey was conducted in June 2022.

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