Index up, but so are small business concerns

William Dunkelberg

A measure of optimism among small business owners has increased, but so have concerns over labor and supply chain issues.

“As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business. “The biggest problems facing small employers right now is finding enough labor to meet their demand and, for many, managing supply chain disruptions.”

The NFIB reported its Small Business Optimism Index rose four-tenths of a point to 100.1 in August. The index is based on the results of monthly surveys of members of the small business advocacy group, most of them small business owners.

For August, five of 10 components of the index advanced, four declined and one remained unchanged.

The proportion of those responding to the survey upon which the August index was based who expect the economy to improve in coming months fell eight points. At a net negative
28 percent, more respondents expected worsening conditions. The component has dropped 16 points over the past two months to its lowest level since 2013.

A net 30 percent of owners reported plans to increase capital outlays in coming months. That’s up four points from July, but still historically weak. A net 10 percent said they consider now a good time to expand, down three points.

A net 32 percent of those responding to the survey reported plans to increase employment, up five points from a month ago.

A net 50 percent reported unfilled job openings, up a point to a record high for a second consecutive month. Asked to identify their single most important business problem, a record 28 percent cited quality of labor and 8 percent labor costs.

A net 41 percent reported raising compensation, up three points to a record level. A net 26 percent said they plan to raise compensation in the next three months, down a point from a record-high reading in July.

The share of those who said they expect higher sales rose two points. But at net negative 2 percent, more said they anticipated lower sales.

The proportion of those reporting higher earnings fell two points to a net negative 15 percent. Among those reporting lower earnings, 34 percent blamed higher material costs, 27 percent cited weaker sales and 9 percent attributed the change to labor costs. For those reporting higher earnings, 60 percent credited increased sales and 10 percent higher prices.

A net 11 percent of respondents reported plans to increase inventories, up five points. A net 11 percent said they consider their current inventories too low, down a point from a record reading in July.