Inflation is the biggest hurdle many small business owners encounter in running their companies, according to a monthly survey conducted by the National Federation of Independent Business.
The NFIB Small Business Optimism Index decreased slightly in January to 97.1, down 1.8 points from December. Inflation remains a problem for small businesses as 22% of owners reported that inflation was their single most important business problem, unchanged from December when it reached the highest level since 1981. The net percent of owners raising average selling prices increased four points to a net 61% (seasonally adjusted), the highest reading since the fourth quarter of 1974.
“More small business owners started the new year raising prices in an attempt to pass on higher inventory, supplies and labor costs,” NFIB Chief Economist Bill Dunkelberg stated in a release. “In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions.”
Key findings include:
- Owners expecting better business conditions over the next six months increased two points to a net negative 33%. Small business owners remain pessimistic about future economic conditions as this indicator has declined 13 points over the past six months.
- Forty-seven percent of owners reported job openings that could not be filled, a decrease of two points from December.
- Inventory accumulation plans fell five percentage points.
As reported in NFIB’s monthly jobs report, a net 50% (seasonally adjusted) reported raising compensation, a 48-year record high reading. A net 27% plan to raise compensation in the next three months. Eleven percent of owners cited labor costs as their top business problem and 23% said that labor quality was their top business problem.
Owners’ plans to fill open positions remain at record high levels, with a seasonally adjusted net 26% planning to create new jobs in the next three months, down two points from December and just six points below the highest reading in the 48-year history of the survey set in August.
Fifty-eight percent of small business owners reported capital outlays in the last six months, up one point from December. Of those owners making expenditures, 40% reported spending on new equipment, 22% acquired vehicles, 15% improved or expanded facilities, 8% acquired new buildings or land for expansion, and 15% spent money for new fixtures and furniture.
