Unexpectedly, confidence among U.S. small businesses dipped in January, largely due to deteriorating income expectations among owners amidst persistent inflation.
The National Federation of Independent Business (NFIB) reported on Tuesday that its small-business optimism index fell to 89.9 from 91.9 in December, disappointing economists’ expectations for an increase, as indicated by a poll conducted by The Wall Street Journal. The index has remained below the long-term average of 50 for over two consecutive years.
Bill Dunkelberg, NFIB’s chief economist, attributed the decline in optimism to ongoing inflationary pressures, stating, “Optimism among small business owners dropped as inflation remains a key obstacle on Main Street.” Approximately 20% of owners identified price increases as their primary operational challenge, closely trailing concerns about labor quality. A net 22% of respondents reported raising average selling prices.
Dunkelberg noted that small business owners are making necessary adjustments to navigate economic challenges, particularly in response to inflation. Inflation is expected to have moderated to 2.9% in January, with official figures set to be released later on Tuesday.
NFIB’s survey also indicated a bleaker outlook on sales prospects among businesses, with the net proportion of owners anticipating volume increases dropping by over 12 points.