Small business optimism falls amid rise in uncertainty

Small business optimism fell last month as fewer owners were profitable and more were uncertain over the economy, according to the National Federation of Independent Business. .NFIB Small Business Optimism Index fell 3.0 points in March to 95.8, under its 52-year average of 98.0 for the first time in nearly a year. The index tracking uncertainty increased four points to 92, higher than its historical average of 68. The frequency of positive profit trends dropped 11 points to a net negative 25 percent. Owners anticipating better business conditions fell seven points to a net 11 percent, its third straight monthly decline and a 17-month low. The employment index fell to 101.6 from 103.5, still higher than its historical average of 100. Sixteen percent of small business owners expect to make capital outlays in the next six months, its lowest mark in 16 years. NFIB’s small business employment index fell 1.9 points to 101.6. Thirty two percent of small business owners had job openings they could not fill in March, down one point from the previous month but still higher than its historical average of 24 percent. A seasonally adjusted net 12 percent of owners expect to create jobs in the next three months, unchanged from February and near the average of a net 11 percent. A seasonally adjusted net 33 percent raised compensation, down one point from February. A seasonally adjusted net 18 percent expect to raise compensation in the next three months, down four points from February and its lowest reading since last July. A seasonally adjusted net negative 5 percent of owners saw higher nominal sales in the past three months, down six points from February and ending four straight months of improvement. Sixty two percent of owners said supply chain disruptions impacted their business, up three points from February. Forty-two percent reported a mild impact, and 36 percent saw no impact.Chief Economist Bill Dunkelberg said the 20 percent small business deduction, which allows eligible pass-through entities to deduct up to 20 percent of qualified business income from federal income taxes, is benefiting small business owners. “However, the dramatic spike in oil prices has spooked consumers and owners alike,” Dunkelberg added. “Small business owners are having to absorb those higher input costs and pass them along to their customers.”Other report findings included:Nineteen percent of owners cited taxes as their most important issue, unchanged from February. Fifteen percent cited labor quality as their most important problem, while 14 percent cited inflation as the No. 1 concern. Price increases picked up after three straight months of declines. The net percent of owners increasing average selling prices rose 1 point to a net 25 percent, higher than its historical average.Fifty one percent reported the health of their business as “good”, while 30 percent listed it as “fair.” Thirteen percent rated the condition of their business as “excellent.”