A measure of optimism among small business owners has declined along with expectations for improving conditions.

“With inflation, an ongoing staffing shortage and supply chain disruptions, small business owners remain pessimistic about their future business conditions,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business.

The NFIB reported its Small Business Optimism Index fell 2.4 points to 93.2 in March — the third consecutive month below 98, the average reading for the 48-year history of the index. The small business advocacy group bases the index on the results of monthly surveys of members, most of them small business owners.

Five of 10 components of the index retreated between February and March, while two advanced and three remained unchanged.

The proportion of NFIB members who responded to the survey upon which the March index was based who expect the economy to improve over the next six months fell 14 points. At a net negative 49 percent, more respondents anticipated worsening conditions. That’s the lowest level ever recorded for the reading.

The proportion of members who expect higher sales volumes dropped 12 points to a net negative 18 percent.

A net 26 percent reported plans for capital outlays, down a point. A net 6 percent said they consider now a good time to expand, down two points.

A net 20 percent of members said they plan to increase staffing, up a point. But 47 percent reported unfilled job openings, down a point.

Inflation and labor shortages both constitute problems for small businesses, Dunkelberg said.

Asked to identify their most important business problem, 31 percent cited inflation. That’s the up five points from February to the highest reading since the first quarter of 1981. Another 22 percent cited quality of labor.

A net 72 percent of members reported raising average sales prices — the highest reading ever recorded. 

A net 49 percent reported raising compensation, down a point from a record high in January. A net 28 percent said they plan to raise compensation in the next three months.

The share of those reporting higher earnings remained unchanged. But at a net negative 17 percent, more members reported lower earnings. Among those reporting lower earnings, 35 percent blamed higher materials costs and 23 percent blamed weaker sales.

A net 2 percent reported plans to increase inventories, unchanged from February. A net 9 percent said existing inventories were too low, up two points. Meanwhile, 40 percent said supply chain disruptions have had significant effects on their businesses.