Inflation, the supply chain sends optimism to small businesses to a 48-year low

NFIB’s optimism index fell 0.1 points in May to 93.1, marking the fifth consecutive month below the 48-year average of 98. Owners expecting better business conditions over the next six months fell four points to net negative 54 percent, the lowest recorded level in the 48-year study. Expectations of better business conditions have been deteriorating every month since January.

Twenty-eight percent of homeowners say inflation is their single most important issue in running their business, down four points from April. The net percentage of owners raising average sales prices increased by two percentage points to a net 72 percent (seasonally adjusted), back to the highest in the 48-year history of the survey, last reached in March, and 32 percentage points higher. high since May 2021

“Inflation continues to outpace compensation, which has reduced real incomes across the country,” said NFIB chief economist Bill Dunkelberg. “Small business owners remain very pessimistic about the second half of the year, as supply chain disruptions, inflation and labor shortages do not diminish.

State-specific data are not available, but NFIB Director of State Rosemary Elebash said labor remains a critical issue for small businesses in Alabama. “Unemployment has dropped to 2.8 percent, the lowest level in the state’s history, but our small business members say they still can’t find enough people to work. Employers are willing to train people, but they say no one is applying, and because they don’t have enough people to work, they still have to reduce working hours and limit the services they provide. ”

Other key findings from the national survey include:

  • Fifty-one percent of owners report vacancies that cannot be filled, four points more than in April.
  • The net percentage of owners who expect real sales to be higher fell by three percentage points from April to a net negative of 15 percent.
  • A net 46 percent (seasonally adjusted) of the owners reported an increase in compensation, down three points from April, with a net 25 percent planning to increase compensation over the next three months, down two points from April but historically high.
  • Thirty-nine percent of owners reported that supply chain disruptions had a significant impact on their business, up three points. Another 31 percent reported moderate impacts and 22 percent reported mild impacts. Only 8% of owners say they have not been affected by recent supply chain disruptions.

According to the NFIB’s monthly job report, labor markets have tightened as 51 percent (seasonally adjusted) of all owners have reported vacancies they could not fill during the current period. Ninety-two percent of those who hire or are trying to hire report few or no qualified candidates for the positions they are trying to take. Twelve percent of owners cite labor costs as a major business problem. Twenty-three percent said quality of work was their main business problem, behind inflation.

Without correction, 3 percent of owners reported lower average sales prices, and 71 percent reported higher average sales prices. Rising prices are most common in wholesale (80 percent higher, 4 percent lower), manufacturing (79 percent higher, 1 percent lower), retail (78 percent higher, 2 percent lower) and construction (77 percent more, 2 percent low).

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Fifty-three percent of homeowners reported capital expenditures in the past six months, down one point from April. Of those owners who incur costs, 36 percent report costs for new equipment, 21 percent have acquired vehicles, and 15 percent have improved or expanded facilities. Six percent of the owners have acquired new buildings or land for expansion, and 12 percent have spent money on new bodies and furniture. Twenty-five percent of owners plan capital expenditures over the next few months, down two points from April.

One percent of owners (seasonally adjusted) reported higher nominal sales in the last three months, down two points from April. The net percentage of owners who expect higher real sales volumes decreased by three percentage points to a net negative of 15 percent.

The net percentage of owners reporting an increase in inventory fell by five percentage points to a net negative 1 percent. Seventeen percent of owners report an increase in inventories, while 15 percent report declines as solid sales reduce inventories in many companies. The net 8 percent of owners believe that current stocks are “too low” in May, which is two points more than in April. Net 1% of owners plan to invest in inventory in the coming months.

The frequency of reports of positive profit trends is a net negative of 24 percent, down seven points from April. Among owners who report lower profits, 34 percent blame the increase in the price of materials, 25 percent blame lower sales, 10 percent cite labor costs, 9 percent cite the usual seasonal change, 8 percent cite lower prices and 3 the percentage of higher taxes or regulatory costs. For owners who report higher profits, 49 percent credit sales, 18 percent cite higher prices and 16 percent cite the usual seasonal change.

Two percent of homeowners report that all their loan needs are not being met. Twenty-two percent said all credit needs were met, and 65 percent said they were not interested in a loan. A net 4 percent said their last loan was harder to obtain than in previous attempts. One percent of homeowners report that financing is their main business problem. A net 14 percent of homeowners say they pay higher interest on their last loan, two points less than in April.

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