Small Business Optimism Index edges up despite lower expectations

A measure of optimism among small business owners has edged up, but also reflects record-low expectations for improving conditions.

William Dunkelberg

“As the end of the year nears, the outlook for business conditions is not encouraging to small business owners as lawmakers propose additional mandates and tax increases,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business. “Owners are also pessimistic as many continue managing challenges like rampant inflation and supply chain disruptions.”

The NFIB reported its Small Business Optimism Index rose two-tenths of a point to 98.4 in November.

Tony Gagliardi NFIB

Tony Gagliardi, state director of the NFIB in Colorado, said small business owners are waiting for the Colorado Legislature to convene in January and approve a plan to shore up an unemployment trust fund with a $1 billion deficit. The plan would involve moving $500 million from the state’s general fund and adding an additional $100 million Colorado received under the American Recovery Plan Act.

The small business advocacy group bases the index on the results of monthly surveys of members, most of them small business owners. For November, four of 10 components of the index increased, four declined and two remain unchanged.

The proportion of those responding to the survey upon which the November index was based who said they expect the economy to improve in coming months fell a point from October to a net negative 38 percent and a tie for the lowest reading in the 48-year history of the index.

A net 27 percent of respondents reported plans to increase capital outlays, down four points. A net 10 percent said they consider now a good time to expand, unchanged.

A net 25 percent reported plans to increase staffing, down a point. A net
48 percent reported unfilled job openings, also down a point. Asked to identify their single most important business problem,
29 percent cited quality of labor and 9 percent cost of labor.

A net 44 percent of respondents said they raised compensation, a record-high proportion. A net 32 percent said they expect to raise compensation in the next three months, also a record.

The share of those who said they expect more sales rose two points to 2 percent.

The share of those reporting higher earnings remained unchanged. But at a net negative 17 percent, a bigger share reported lower earnings. Among those reporting higher earnings, 61 percent credited sales volume. Of those reporting lower earnings, 32 percent blamed the cost of materials and 25 percent lower sales.

A net 10 percent reported plans to increase inventories, up two points. A net 15 percent said they consider current inventories too low, up six points.