By Yara Abi Farraj
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U.S. small business confidence at 6-month high in June despite inflation worries

22 percent of businesses planned to increase compensation in the next three months
U.S. small business confidence at 6-month high in June despite inflation worries
The share of U.S. small businesses reporting capital outlays in the last six months dropped 6 points to 52 percent, the lowest level since August 2022

U.S. small-business confidence rose to a six-month high in June. However, inflation worries lingered amid a rise in the share of owners planning to raise compensation for workers over the next three months. The National Federation of Independent Business (NFIB) revealed on Tuesday that its Small Business Optimism Index rose 1 point to 91.5 in June, the highest level since last December.

Confidence remains below 50-year average

Despite the increase, June’s U.S. small-business confidence marked the 30th consecutive month that the index remained below the 50-year average of 98 as inflation concerns persisted and higher borrowing costs impacted capital investment.

The NFIB revealed that 22 percent of businesses planned to increase compensation in the next three months, up four points from May, despite 37 percent of owners reporting job openings they could not fill, down five points from May.

However, the federation noted that the labor market remained tight in the construction, transportation and retail sectors. Around 16 percent of U.S. businesses reported unfilled positions for unskilled labor, an increase of two points from May.

In contrast, the share of U.S. small-business owners reporting open vacancies for skilled workers declined six points to 31 percent while job creation plans remained stable.

U.S. labor market uncertain

The U.S. labor market is loosening up amid restrictive monetary policy and higher interest rates. Government data last week revealed that there were 1.22 job openings for every unemployed person in the U.S. in May. Meanwhile, the unemployment rate rose to a 2.5-year high of 4.1 percent in June.

The share of U.S. small businesses raising average selling prices increased two points to 27 percent in June. However, the proportion of businesses planning price increases declined by two points to 26 percent.

Read: U.S. trade deficit rises 0.8 percent to $75.1 billion in May on weaker exports

Consumer prices to rise

Government data on Thursday will likely show consumer prices rising 0.1 percent in June after remaining stable in May. The annual increase in consumer inflation is forecast to have slowed to 3.1 percent in June from 3.3 percent in May.

Notably, higher borrowing costs are limiting capital expenditure, with the share of U.S. small businesses reporting capital outlays in the last six months dropping six points to 52 percent, the lowest level since August 2022. The proportion of businesses planning capital outlays over the next six months remained stable at 23 percent.

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