Optimism among small business owners retreated in December to near its lowest level since 2013 as inflation and the employment outlook worsened in the final month of the year.
The National Federation of Independent Business’ (NFIB) optimism index fell to 89.8 last month from 91.9 in November, the group said in a report on Tuesday. Eight out of ten components of the index fell in December.
Only June 2022’s reading of 89.5 kept Tuesday’s report from marking a new 10-year low.
“In general, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” NFIB Chief Economist Bill Dunkelberg said in the report.
Inflation continues to be the single most important issue affecting small businesses, with 32% of business owners citing it as the biggest issue facing their business.
Small businesses have passed some of those costs on to customers, but it looks like that momentum may be waning. The net share of owners raising their average sales prices fell to 43%, the lowest level since May 2021, while 24% of owners plan price increases, down from November figures.
Despite signs of easing price pressures, according to some economists, this was not enough to increase optimism.
“Falling gas prices would normally be enough to boost sentiment among small business owners, but the blow from higher interest rates and stock market volatility are stronger forces right now,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. release. “As a result, the index is now at levels that have accompanied recessions in the past.”
Labor remains the second biggest issue for small businesses, with 41% of all owners reporting vacancies they could not fill in the current period.
Fifty-five percent of owners reported hiring or trying to hire in December, and 93% of those businesses hiring or trying to hire reported few or no qualified candidates for open positions.
Still, the survey’s employment metrics remain high, with an adjusted net 17% of small businesses — or the difference between businesses planning to increase headcount and those planning to cut headcount — planning to add new jobs in the next three months. This number, however, is lower than the 32% recorded in August 2021.
“The widely expected (predicted) recession has not arrived in 2022, but is still expected this year,” the report said. “The negative impact of the dramatic increase in interest rates has not been fully felt, and further rate increases are almost certain at the beginning of the year.”
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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