Small business optimism sags under high fuel prices

Small business owner optimism remained muted last month as high fuel prices continued impacting small businesses, according to the National Federation of Independent Business. .The NFIB Small Business Optimism Index fell 0.6 points last month to 95.3, under its 52-year average of 98.0. The index tracking uncertainty increased three points to 91, 23 points higher than its historical average, 68. Nineteen percent of small business owners cited taxes as their most pressing issue, up two points from April and their top overall concern. “AI investment spending has contributed to some excitement in the economy,” said NFIB Chief Economist Bill Dunkelberg. “Despite the enthusiasm around AI, the overall picture is divided. More small business owners are struggling with significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared to their larger corporate competitors.”Gas prices have soared since the start of the war in Iran in late February. The conflict has had a significant impact on oil supplies, with 20 percent of the world’s supply passing through the now-restricted Strait of Hormuz. Eighteen percent of owners cited inflation as their No. 1 business problem, up two points from April and its highest reading since December 2024. A net 36 percent of owners raised average selling prices, its highest reading since March 2023. A net 34 percent expect to increase prices over the next three months, up seven points from April. The small business employment index was flat, 100.3 in May, lower than its average of 101.2 last year but still higher than its historical average of 100. A seasonally adjusted 29 percent of small business owners had job openings they could not fill, down five points from April and a six-year low. A seasonally adjusted net 9 percent expect to create new jobs in the next three months, also a six-year low and down four points from April. A record 14 percent of owners cited labor costs as their most important problem, up five points from April. Thirteen percent of owners listed labor quality as their top issue, down five points from April and a nearly 10-year low. Sixteen percent expect to make capital outlays in the next six months, down one point from April and a 17-year low. A seasonally adjusted net 34 percent expect to increase prices, up seven points from April. Seventy percent of owners said supply chain disruptions impacted their businesses, up six points from April. Owners raising average selling prices increased six points to a net 36 percent.