A measure of optimism among small business owners has increased, but continues to reflect challenges posed by inflation and staffing shortages.

The National Federation of Independent Business reported its Small Business Optimism Index rose a half point to 90.3 in January. The index remains below its 49-year average of 98.

“While inflation is starting to ease for small businesses, owners remain cynical about future business conditions,” said Bill Dunkelberg, chief economist of the NFIB. “Owners have a negative outlook on the small business economy, but continue to try to fill open positions and return to a full staff to improve productivity.”

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 January, six of 10 components of the index increased and four decreased.

The proportion of NFIB members responding to the survey upon which the January index was based who expect the economy to improve rose six points between December and January. But at a net negative 45 percent, more members anticipated worsening conditions.

A net 21 percent reported plans for capital outlays, down two points. A net 7 percent said they consider now a good time to expand, up two points.

The share of respondents expecting increased sales fell four points. At a net negative 14 percent, more expected decreased sales.

Expectations for profits increased four points. But at net negative 26 percent, more respondents anticipated decreasing profits. Among those reporting lower profits, 27 percent blamed weaker sales and 26 percent cited higher material costs. Among those reporting higher profits, 53 percent credited stronger sales.

A net 19 percent of survey respondents reported plans to increase staffing, up two points. A net 45 percent reported unfilled job openings, up four points.

A net 46 percent reported raising compensation, while another 22 percent reported plans to increase compensation within the next three months.

The proportion of respondents planning to increase inventories fell four points to a net negative 8 percent. A net 1 percent said existing inventories were too low, down two points.

Asked to identify their single most important business problem, 26 percent cited inflation. That’s down six points from December. A net 42 percent reported raising average sales prices,  the lowest proportion since May 2021. Price hikes were most frequent in the construction, retail and wholesale sectors.

Another 24 percent of respondents cited the quality of labor as their most pressing problem and 10 percent the cost of labor.