US small business owners say inflation biggest challenge
Business optimism remains well below 50-year average in latest ‘optimism index’
11 June 2024 - 16:09
byReuters
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A street corner in Manhattan, New York, the US. Picture:123RF
US small-business confidence and hiring plans increased in May to their highest levels of the year, but the looming US presidential election also drove uncertainty to nearly a four-year high, a survey showed on Tuesday.
The National Federation of Independent Business (NFIB) said its small business optimism index rose eight-tenths of a point to 90.5 last month, the second consecutive month it has risen after slumping in March to the lowest level since December 2012.
Despite the gain, it was the 29th straight month the index was below the 50-year average of 98. The NFIB’s uncertainty index rose nine points to 85, the highest reading since November 2020, the month the last US presidential election took place.
Inflation was rated as their single most important problem by 22% of business owners, unchanged from April. The share of businesses planning price hikes increased two points to 28%.
The net percent of owners raising average selling prices was 25%, also unchanged from April. The Federal Reserve is keenly monitoring the pace of price increases as it tries to return inflation to its 2% target.
There were some indications that small business owners may be beginning to pull back on raising wages. A net 37% of owners reported increasing compensation, down one point from 38% in April, while 18% planned to boost compensation over the next three months, down three points and the lowest reading since March 2021.
Small businesses have increasingly felt pressured in the face of persistent inflation and high borrowing costs. The US central bank on Wednesday is expected to leave its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since last July. The Fed has raised its policy rate by 525 basis points since March 2022 to tame elevated inflation.
“For 29 consecutive months, small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years,” said Bill Dunkelberg, NFIB’s chief economist.
Inflation remains sticky at elevated levels and renewed evidence that the job market continues to add workers at a solid clip has caused financial markets to reduce bets to about even odds that the Fed would start its easing cycle in September.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
US small business owners say inflation biggest challenge
Business optimism remains well below 50-year average in latest ‘optimism index’
US small-business confidence and hiring plans increased in May to their highest levels of the year, but the looming US presidential election also drove uncertainty to nearly a four-year high, a survey showed on Tuesday.
The National Federation of Independent Business (NFIB) said its small business optimism index rose eight-tenths of a point to 90.5 last month, the second consecutive month it has risen after slumping in March to the lowest level since December 2012.
Despite the gain, it was the 29th straight month the index was below the 50-year average of 98. The NFIB’s uncertainty index rose nine points to 85, the highest reading since November 2020, the month the last US presidential election took place.
Inflation was rated as their single most important problem by 22% of business owners, unchanged from April. The share of businesses planning price hikes increased two points to 28%.
US economy slows in first quarter while inflation picks up
The net percent of owners raising average selling prices was 25%, also unchanged from April. The Federal Reserve is keenly monitoring the pace of price increases as it tries to return inflation to its 2% target.
There were some indications that small business owners may be beginning to pull back on raising wages. A net 37% of owners reported increasing compensation, down one point from 38% in April, while 18% planned to boost compensation over the next three months, down three points and the lowest reading since March 2021.
Small businesses have increasingly felt pressured in the face of persistent inflation and high borrowing costs. The US central bank on Wednesday is expected to leave its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since last July. The Fed has raised its policy rate by 525 basis points since March 2022 to tame elevated inflation.
“For 29 consecutive months, small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years,” said Bill Dunkelberg, NFIB’s chief economist.
Inflation remains sticky at elevated levels and renewed evidence that the job market continues to add workers at a solid clip has caused financial markets to reduce bets to about even odds that the Fed would start its easing cycle in September.
Reuters
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