Small business optimism increased in July

Small business owner optimism increased in July as more owners reported favorable conditions to expand, according to the National Federation of Independent Business. .The small business optimism index increased 1.7 points in July to 100.3, edging above its 52-year average of 98. Sixteen percent said now is a good time to expand, up five points from June. Uncertainty also increased, with the related index rising eight points to 97. Labor quality reemerged as the top challenge for small business owners, cited by 21 percent as their most pressing issue, up five points from June. Seventeen percent cited taxes as their most pressing issue, down two points from June. An even 11 percent cited inflation and sales concerns as their No. 1 problems, their highest marks since 2021. “Optimism rose slightly in July with owners reporting more positive expectations on business conditions and expansion opportunities,” said NFIB Chief Economist Bill Dunkelberg. “While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20 percent Small Business Deduction permanent and the final shape of trade policy.”Fifty two percent rated the health of their business as good. Thirteen percent rated their business health as excellent, up five points from June. Of the 57 percent of owners either hiring or trying to hire, 84 percent reported having few or no qualified applicants. One-third reported having job openings they could not fill, its lowest mark since 2020 but still higher than the monthly historical average of 25 percent. A seasonally adjusted net 14 percent of owners plan to create new jobs in the next three months, up one point from June. A net 27 percent raised compensation, down six points from the previous month, and 17 percent plan pay increases in the next three months.A net 24 percent of businesses raised selling prices last month, down five points from June. A net 28 percent planned to increase prices, down four points from June but still much higher than its historical average. The share of owners making capital outlays in the past six months increased to 55 percent, with most investing in equipment, vehicles and facility improvements.