U.S. small business sentiment recovered in April despite persistent inflationary pressures impacting prices and business operations. The latest report from the National Federation of Independent Business (NFIB) revealed that its Small Business Optimism Index increased 1.2 points to 89.7 in April after declining to its lowest level since December 2012 in March. Despite the increase, small business sentiment remained below the 50-year average of 98 for the 28th consecutive month.
Inflation remains a concern
The NFIB report reveals that 22 percent of small business owners across the U.S. stated that inflation was their most important concern when operating their business, a decline of three points from March. However, the number of businesses planning price increases declined by seven points to 26 percent in April, the lowest level in a year. In addition, the net percent of owners raising average selling prices fell three points from March to a net 25 percent.
“Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees,” said Bill Dunkelberg, NFIB chief economist.
Hiring challenges
Eleven percent of U.S. small business owners cited labor costs as their top business problem, up 1 point from March and two below the highest reading of 13 percent in December 2021. Meanwhile, 19 percent of them stated that labor quality was their top business problem, remaining behind inflation as the number one issue.
In an earlier jobs report, NFIB revealed that 56 percent of small business owners in the U.S. reported hiring or trying to hire in April. Of those hiring or trying to hire, 91 percent reported few or no qualified applicants for the positions they were trying to fill.
Therefore, a net 38 percent of U.S. small business owners reported raising compensation in April. Moreover, 21 percent plan to raise compensation in the next three months, unchanged from March, in an effort to retain their employees.
“Overall, small business owners remain historically very pessimistic as they continue to navigate these challenges. Owners are dealing with a rising level of uncertainty but will continue to do what they do best – serve their customers,” added Dunkelberg.
For more news on the economy, click here.
