A measure of optimism among small business owners continues to decline even as concerns mount over inflation, supply chain disruptions and labor shortages.

“Inflation continues to be a problem on Main Street, leading more owners to raise selling prices again in February,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business. “Supply chain disruptions and labor shortages also remain problems, leading to lower earnings and sales for many.”

The NFIB reported its Small Business Optimism Index fell 1.4 points to 95.7 in February. It was the second consecutive month the index dropped below 98, the average reading over the past 48 years.

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

For February, six of 10 components of the index retreated.

Asked to identify their single most important business problem, 26 percent of those who responded to the survey upon which the February index was based cited inflation. That proportion has climbed four points since December to the highest level since the third quarter of 1981. Another 22 percent of respondents cited quality of labor and 11 percent cited labor costs.

A net 68 percent of owners reported raising average selling prices, a record high. Price hikes were most frequent in the retail, wholesale and construction sectors.

A net 45 percent reported raising compensation, down five points from a record reading in January. A net 28 percent said they expect to raise compensation in the next three months, however.

The proportion of business owners who said they expect the economy to improve fell another two points from January. At a net negative 35 percent, more respondents said they anticipated worsening conditions.

A net 27 percent reported plans for capital outlays, also down two points. A net 8 percent said they consider now a good time to expand, down a point.

A net 19 percent of owners reported plans to increase staffing, down seven points. A net 48 percent reported unfilled job openings, up a point.

The share of those who said they expect more sales fell three points to a net negative 6 percent. 

The share of those reporting higher earnings remained unchanged at a net negative 17 percent. Among those reporting lower earnings, 28 percent blamed weaker sales and 28 percent cited higher material costs.

A net 2 percent of owners reported plans to increase inventories, down a point. A net 7 percent said existing inventories were too low, unchanged from January.