A measure of optimism among small business owners has retreated on less upbeat expectations for the economy, sales and earnings as well as concerns about labor availability.

The National Federation of Independent Business reported its Small Business Optimism Index fell 2.8 points to 99.7 in July. The decrease nearly erased a 2.9-point increase in June, but the index remains above its average reading of 98.

“Small business owners are losing confidence in the strength of the economy and expect a slowdown in job creation,” said Bill Dunkelberg, chief economist of the NFIB.

“As owners look for qualified workers, they are also reporting that supply chain disruptions are having an impact on their businesses,” Dunkelberg said. “Ultimately, owners could sell more if they could acquire more supplies and inventories from their supply chains.”

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners.

For July, six of 10 components of the index declined, three advanced and one remained unchanged.

The proportion of those who responded to the survey upon which the July index was based who expect the economy to improve over the next six months fell eight points from June. At a net negative 20 percent, more respondents indicated they expected worsening conditions.

A net 26 percent reported plans to make capital outlays, up a point. A net 13 percent said they consider now a good time to expand, down two points.

The share of those who said they expect higher sales dropped 11 points to a net negative 4 percent.

The proportion of those reporting higher earnings fell eight points. At a net negative 13 percent, more reported lower earnings. Among those reporting lower earnings, 32 percent blamed weaker sales and 31 percent higher material costs.

A net 27 percent of respondents reported plans to increase employment, down a point from a record-high reading in June. But a record 49 percent reported unfilled job openings, up three points. Asked to identify their single most important business problem,
26 percent cited labor quality and 9 percent cited labor costs. 

A net 38 percent of owners reported raising compensation, down a point from a record-level in June. A net 27 percent reported plans to increase compensation over the next three months, up a point to a record high.

A net 6 percent reported plans to increase inventories, down five points. A net 12 percent said they consider they consider current inventories too low, up a point to a record high.