Small business owner sentiment improves, remains low

Small business owner sentiment improved last month but remains limited by inflation, according to the National Federation of Independent Business. .The NFIB Small Business Optimism Index increased 1.2 points last month to 89.7, its first increase this year. The index has been below the index's 50-year average since December 2021. .Thirty-four percent of owners had openings for skilled workers, up three points, and 18 percent had openings for unskilled labor, a four-point increase. Reports of labor quality as the most pressing problem for business owners increased one point to 19 percent, even as labor quality as a top problem for small business owners has eased over the last two quarters. .A net 38 percent of owners raised compensation, while a seasonally adjusted net 21 percent expect to raise compensation in the next three months. Both readings were unchanged from March. .Owners raising average selling prices fell three points from March to a net 25 percent. Twenty-two percent cited inflation as their most pressing issue in operating their business, down three points from March. Inflation increased at a higher than expected 3.5 percent clip in the first quarter, even as GDP rose at a less-than-expected clip of 1.7 percent. .A seasonally adjusted net 12 percent of owners plan to create jobs in the next three months, up one point from March, which was its lowest reading since May 2020. Fifty-six percent reported either hiring or trying to hire in April, which was unchanged for the third straight month. The vast majority of those hiring or trying to hire reported few or no qualified applicants for the positions. .Fifty-six percent of businesses had capital outlays in the last six months, unchanged from March. Of those making expenditures, 38 percent spent on new equipment, 24 percent acquired vehicles and 16 percent expanded or improved their facilities. Twenty-two percent plan capital outlays in the next few months, up two points from March. ."A recovery in investment is needed to support stronger productivity, but this is unlikely to occur while interest rates remain high, and more owners anticipate slower sales," according to the report. "Long term, the worker shortage has given firms an incentive to invest in labor saving technology. But, overall, capital spending is sluggish and not yet back to pre-pandemic levels." .A net negative 13 percent of owners reported higher nominal sales in the past three months, down three points from March. The net percent of owners expecting sales volumes to grow increased six points to a net negative 12 percent. ."Owners remain historically very pessimistic, with optimism at low levels and expectations for economic performance in the second half of the year depressed," according to NFIB.