The NFIB Small Business Optimism Index declined 0.3 points in September to 94.1. The net percent of small business owners who expect better business conditions in the next six months jumped 12 points last month, according to the NFIB Small Business Economic Trends Report, but that gain was erased by significantly weaker inventories and hard-to-fill job openings.
Increased inventories fell seven points while hard-to-fill job openings plunged six points landing at 24 percent. Six of the 10 indices dropped, washing away the rise in expected business conditions.
“We improved from awful to bad,” said Juanita Duggan, NFIB president and CEO. “The bottom line is that small business owners are deeply uncertain about the future, and that is affecting their decisions.”
According to NFIB Chief Economist Bill Dunkelberg, small business owners won’t be hiring or building inventories – both of which signify confidence in the economy – until something changes in Washington.
Fifty-eight percent of business owners reported hiring or trying to hire (up 2 points), but 48 percent reported few or no qualified applicants for the positions they were trying to fill. Seventeen percent cited the difficulty of finding qualified workers as their single most important business problem. This issue ranks second behind taxes but tied with the cost of regulation and red tape. Twenty-four percent of all owners reported job openings they could not fill in the current period, down 6 points from August when it reached the highest for this recovery. A seasonally adjusted net 10 percent plan to create new jobs, up 1 point from August.
Fifty-five percent reported capital outlays, down 2 points from August following a 2 point decline in July. The percentage of owners making an outlay peaked in July 2015 and most recently in January 2016 at 61 percent, but has faded since. The percent of owners planning capital outlays in the next 3 to 6 months fell 1 point to 27 percent, the second highest reading in the recovery, but historically weak. The small business sector remains in “maintenance mode”. Seasonally adjusted, the net percent expecting better business conditions gained 12 percentage points to a net 0 percent, an improvement, but to a still poor reading. The seasonally adjusted net percent expecting higher real sales rose 5 points to 4 percent of all owners, a very weak showing. Clearly, expectations for the economy are not conducive to a meaningful improvement in business investment as prospects for sales and profits are poor.
The lack of “inflation” on Main Street continues to contribute to the Federal Reserve’s frustration. The net percent of owners raising average selling prices was a net negative 1 percent (down 4 points), this in contrast to a net 70 percent raising average prices in the 1970s. Clearly the small business sector can produce “inflation”. Fourteen percent of owners reported reducing their average selling prices in the past three months (unchanged), and 12 percent reported price increases (down 4 points). Nineteen percent plan on raising average prices in the next few months (up 2 points) while only 3 percent plan reductions (down 1 point). Seasonally adjusted, a net 18 percent plan price hikes (up 3 points).
A seasonally adjusted net 22 percent of owners reported raising worker compensation, down 2 points. The net percent planning to increase compensation was unchanged at 14 percent.
