A monthly measure of optimism among small business owners rose to its highest level in more than two years, but still reflects concerns.

The National Federation of Independent Business reported its Small Business Optimism Index rose 2.2 points between June and July to 93.7. That’s the highest reading since February 2022. Still, the index remained below its 50-year average of 98 for a 31st consecutive month.

“Despite this increase in optimism, the road ahead remains tough for the nation’s small business owners,” said Bill Dunkelberg, chief economist of the NFIB. “Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line. Owners are heading towards unpredictable months ahead, not knowing how future economic conditions or government policies will impact them.”

Tony Gagliardi, state director of the NFIB in Colorado, called on Congress to make the 20 percent small business deduction permanent to provide greater certainty.

“Inflation remains the single biggest problem facing small business owners here in Colorado and across thr country,” Gagliardi said. “As Main Street feels the squeeze of rising costs, the uncertainty of future economic conditions and government policies exacerbates the challenges of owning and operating a small business. Congress can help relieve the uncertainty by making the 20 percent small business deduction permanent.”

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners. For July, five of 10 components of the index advanced, two retreated and three remained unchanged.

The proportion of members who responded to the survey upon which the July index was based who expected the economy to improve jumped 18 points. But at a net negative 7 percent, more members still anticipated worsening conditions.

A net 23 percent of members reported plans to make capital outlays over the next six months, unchanged from June. A net 5 percent said they consider now a good time to expand, up a point from a month ago.

The share of members who expected increased sales rose four points. But at a net negative 9 percent — the highest reading this year — more anticipated decreased sales.

The proportion of members who reported increased earnings fell a point to a net negative 30 percent. Among those reporting lower profits, 33 percent blamed weaker sales and 17 percent cited higher material costs.

A net 15 percent of members reported planned to increase staffing, unchanged from June. A net 38 percent reported hard-to-fill job openings, up a point.

A net 2 percent of members reported plans to increase inventories, up four points. A net negative 4 percent said current inventories were two low, down two points.

Asked to identify their single most important problem, 25 percent of members cited inflation, 19 percent the quality of labor and 15 percent taxes.