The National Federation of Independent Business (NFIB) has released its Small Business Optimism Index for April 2024. The report reveals slight improvements, but highlights current challenges due to inflation and labor costs.
The NFIB Small Business Optimism Index rose 1.2 points in April to 89.7, marking the first increase of the year. Despite this, the index The index has remained below the 50-year average of 98 for 28 consecutive months. Inflation remains the top concern for 22% of small business owners, although it is three points lower than in March.
Bill Dunkelberg, chief economist at NFIB, said:
“Cost pressures remain the top issue for small business owners, including historically high levels of owners increasing compensation to retain and attract employees. Overall, small business owners historically remain very pessimistic as they continue to face these challenges. “Owners face an increasing level of uncertainty, but will continue to do what they do best: serve their customers.”
Key findings of the report
- Sales and job creation expectations: The net percentage of owners expecting higher actual sales increased six points to a net negative 12%. A seasonally adjusted net 12% of owners plan to create new jobs in the next three months, slightly above March levels.
- Pricing and Compensation Trends: The net percentage of homeowners planning to raise prices in April fell to 26%, the lowest since April of the previous year. Meanwhile, 38% reported increasing compensation in April, and 21% plan to do so in the next three months.
- Struggles in the labor market: Forty percent of owners reported unfilled vacancies, a three-point increase from March. Fifty-six percent of owners attempted to hire, but 91% reported there were few or no qualified applicants.
- Capital outlays: Fifty-six percent of owners reported capital outlays in the past six months, with expenditures on new equipment (38%), vehicles (24%) and facility upgrades (16%).
Inventory and sales information
- Inventory levels: The net percentage of owners reporting inventory gains increased to a net negative 6%. A net negative 4% considered current inventories “too low” and a net negative 6% considered inventory investments in the coming months.
- Earning Trends: The frequency of reporting positive earnings trends improved slightly but remained low, with a net negative of 27%. Among those reporting lower profits, weaker sales and rising material costs were the main reasons. The higher gains were attributed to increased sales volumes and seasonal changes.
Inflation and labor costs as main concerns
Inflation remains the top issue for 22% of small business owners. Labor costs and quality also remain major issues: 11% cited labor costs and 19% cited labor quality as their top issues.
Financial challenges
- Debt needs: Three percent of homeowners reported unmet debt needs and 28 percent had all of their credit needs met. A net 8% found it harder to get their latest loan compared to previous attempts.
- Interest rates: Four percent of homeowners reported that financing was their top business problem, and 21 percent paid higher rates on recent loans, up four points from March.
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