NEW NFIB SURVEY: Small Business Optimism Improves Again – NFIB

Small business optimism edged higher in August, with the NFIB Small Business Optimism Index up 0.5 points to 100.8—nearly three points above its 52-year average of 98. Of the 10 index components, four rose, four fell, and two were unchanged. Stronger expectations for real sales contributed most to the gain. The Uncertainty Index declined four points to 93, still above its long-run average, reflecting reduced uncertainty around financing and planned capital spending.

NFIB’s chief economist noted that firmer sales expectations and better earnings supported the improvement, while labor quality continues to be the top concern on Main Street.

Hiring and Labor Conditions

• Unfilled job openings: 32% of owners reported positions they could not fill, down 1 point from July and the lowest since July 2020.
• By job type: 28% had openings for skilled workers (down 1 point); 13% for unskilled workers (up 1 point).
• Industry highlights: Construction remained tight with 49% reporting hard-to-fill openings (down 6 points from July and 11 points below last year), indicating a softer job market. Openings were lowest in wholesale and finance.
• Job creation plans: A net 15% plan to add jobs in the next three months (up 1 point), the third straight monthly increase but still low by historical standards.
• Applicant quality: Of the 53% hiring or trying to hire, 81% said they had few or no qualified candidates. Specifically, 26% reported few qualified applicants (down 3 points) and 17% reported none (down 2 points).
• Top problems: 21% cited labor quality as their most important issue (unchanged), while 8% named labor costs (down 1 point).
• Compensation: A seasonally adjusted net 29% raised pay (up 2 points), and a net 20% plan to raise compensation in the next three months (up 3 points).

Capital Spending and Sales

• Capital outlays: 56% made capital expenditures in the past six months (up 1 point), still historically subdued.
• Where money went: 37% bought new equipment, 22% acquired vehicles, 17% expanded or improved facilities, 13% purchased fixtures and furniture, and 5% acquired buildings or land.
• Recent sales: A net -9% reported higher nominal sales in the past three months (unchanged from July).

Inventories and Supply Chains

• Inventory changes: The net share reporting inventory gains rose 2 points to a net -6% (seasonally adjusted). Unadjusted, 10% increased stocks and 14% reduced them.
• Inventory levels: A net 0% viewed current stocks as “too low,” up 3 points; a net 1% plan to invest in inventories, unchanged.
• Supply chain impacts: 54% reported some level of disruption (down 10 points). Three percent cited significant impact (down 1), 15% moderate (down 2), 36% mild (down 7), while 44% reported no impact (up 8).

Pricing, Inflation, and Profits

• Pricing plans: A net 26% plan to raise prices in the next three months (down 2 points).
• Recent price changes: The net share raising average selling prices fell 3 points to 21% (seasonally adjusted), the lowest reading this year. Unadjusted, 33% raised prices and 13% lowered them.
• Inflation concerns: 11% named inflation (higher input costs) as their most important problem, unchanged for the third consecutive month.
• Profit trends: Reports of positive profit trends improved 3 points to a net -19% (seasonally adjusted). Among those with lower profits, 37% cited weaker sales, 18% higher material costs, 10% price changes for their own products/services, and 9% labor costs. For those with higher profits, 65% credited stronger sales volumes, 18% seasonal factors, and 5% higher selling prices.

Financing and Interest Rates

• Top problem: 4% cited financing and interest rates as their most important issue (unchanged).
• Borrowing: 23% borrow regularly (down 2 points), the lowest share since November 2021.
• Credit conditions: A net 3% said their last loan was harder to get (down 1 point). A net 6% reported paying a higher rate on their most recent loan (up 1 point).
• Loan costs: The average rate on short-maturity loans fell 0.6 points to 8.1%, the lowest since May 2023.

Outlook and Expansion

• Business conditions: The net share expecting better conditions eased 2 points to 34% (seasonally adjusted).
• Expansion sentiment: 14% said it’s a good time to expand (down 2 points).

Regulatory, Tax, and Competitive Pressures

• Taxes: 17% cited taxes as their most important problem (unchanged), ranking second overall.
• Regulation: 9% named government regulations and red tape as their top issue (up 1 point).
• Competition: 5% pointed to competition from large businesses as their most important problem (down 1 point).

Overall, small business sentiment improved modestly in August, supported by better sales expectations and earnings. However, labor quality constraints, still-elevated uncertainty, and cautious capital spending continue to shape the outlook.