Small business optimism limited as inventory grows

Excess inventories are limiting small business owner optimism, according to the National Federation of Independent Business. .The NFIB small business optimism index remained slightly higher than its 51-year average of 98.0 last month, at 98.6. The index tracking uncertainty fell five points to 89. A net negative 5 percent of owners saw current inventory stock as too low in June, down six points from the previous month. Twelve percent reported current inventories as being too high last month, up from 7 percent in May. Nineteen percent of small business owners cited taxes as their No. 1 problem, up one point from May and again their most pressing issue. Sixteen percent of owners cited labor quality as their top problem, unchanged from May. Eleven percent listed inflation as their No. 1 issue, down three points from May and its lowest reading in nearly four years. Owners expecting business conditions to improve fell three points in June to a net 22 percent in June, which is still much higher than the historical average of a net 3 percent. Owners expecting higher real sales volumes dropped three points from May to a net 7 percent. Twenty-one percent expect to make capital outlays in the next six months, down one point from May. Half made capital outlays in the last six months, down six points from May and its lowest reading in nearly five years. Of those, 33 percent spent on new equipment, 18 percent bought vehicles and 13 percent improved or expanded facilities. Owner views of the health of their businesses fell, with only 8 percent reporting being in excellent condition, down six points from May. Forty nine percent reported their business was in good condition, which was also down six points. Thirty-five percent said their business was in fair condition, while 7 percent said it was in poor condition. A net 29 percent are raising their average selling prices. Nearly one-third expect to increase prices, up one point from May and its highest reading since March 2024. The frequency of positive profit trend reports was a net negative 22 percent in June, four points better than the previous month. Of those seeing less profit, 40 percent cited weaker sales, 32 percent listed usual seasonal changes and 17 percent attributed the drop to a rise in materials costs. “Small business optimism remained steady in June while uncertainty fell,” said NFIB Chief Economist Bill Dunkelberg. “Taxes remain the top issue on Main Street, but many others are still concerned about labor quality and high labor costs.”