By Xavier Fontdegloria
Confidence among small-business owners in the U.S. leveled off in April after three consecutive months of drops, but inflation and labor shortages continued to weigh heavily on short-term economic expectations.
The NFIB Small Business Optimism Index was unchanged at 93.2 in April compared with the previous month, the lowest level since April 2020. Economists polled by the Wall Street Journal expected the index to fall to 92.9.
The number of respondents who expected better business conditions in the next six months fell again in April, albeit less than in the previous months, according to the NFIB. However, the index fell to the lowest level recorded in the survey’s history.
However, the number of owners who expect real sales to be higher in the short-term increased somewhat, although views were still gloomy, according to the survey’s data.
“Owners are very pessimistic about sales and business conditions in the second half of the year,” NFIB Chief Economist Bill Dunkelberg said. “This dampens capital investment and, eventually, will feed into employment if sales actually slow as expected,” he said.
The NFIB survey is a monthly snapshot of small businesses in the U.S., which account for nearly half of private sector jobs. Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy.
Earnings trends as well as plans to increase inventories, employment and capital outlays were broadly unchanged in April compared with the previous month.
Small firms continued to struggle to find and maintain workers, with 47% of owners reporting job openings that couldn’t be filled, unchanged from March.
“Labor supply is not responding strongly to small businesses’ high wage offers,” Mr. Dunkelberg said. “Job growth will continue opportunistically but not robustly as the available supply of workers is small,” he said.
Price pressures continued to be elevated. In April, 70% of small-business owners said they were raising average selling prices, down slightly from 72% the previous month.
Inflation persisted as the most important problem when operating the business with 32% of the respondents citing it, the highest reading since the fourth quarter of 1980. “Small business owners are struggling to deal with inflation pressures,” Mr. Dunkelberg said.
Write to Xavier Fontdegloria at [email protected]