A measure of optimism among small business owners has retreated to its lowest level in more than a decade as expectations for increased sales dropped.

The National Federation of Independent Business reported its Small Business Optimism Index fell nine-tenths of a point to 88.5 in March. That’s the lowest level since 2012 and stretches to 27 the consecutive months the index has remained below it’s 50-year average of 98.

“Small business optimism has reached the lowest level since 2012 as owners continue to manage numerous economic headwinds,” said Bill Dunkelberg, chief economist of the NFIB. “Inflation has once again been reported as the top business problem on Main Street, and the labor market has only eased slightly.”

The NFIB bases the index on monthly surveys of members of the small business advocacy group, most of them small business owners. Between February and March, six of 10 components of the index decreased, two increased and two remained unchanged.

The proportion of NFIB members who responded to the survey upon which the March index was based who expected the economy to improve increased three points. But at net negative
36 percent, more owners anticipated worsening conditions ahead.

A net 20 percent of owners reported plans for capital outlays, down a point from February. A net 4 percent said they consider now a good time to expand, also down a point.

The share of owners who expected increased sales dropped eight points to a net negative 18 percent.

Expectations for increased earnings rose two points. But at a net negative 29 percent, more owners anticipated decreased earnings. Among owners reporting lower profits, 29 percent blamed weaker sales and 17 percent cited higher costs for materials.

A net 11 percent of owners reported plans to increase staffing, down a point. A net 37 percent reported hard-to-fill job openings, unchanged from a month ago.

The proportion of owners reporting plans to increase inventories remained unchanged at a net negative 7 percent. The share of those who said existing inventories were too low fell a point to a net negative 5 percent.

Asked to identify their single most important business problem, 25 percent of owners cited inflation, while 18 percent cited the quality of labor and 14 percent cited taxes.