Small Business Optimism Drops to Lowest Level in 7 Years Due to Inflation Concerns

Small business optimism has been on a decline since December 2012, according to a report from the NFIB. This was largely due to inflation concerns, which continue to be the biggest challenge for small businesses. In March, the Optimism Index reached its lowest level since then, at 88.5, marking the 27th consecutive month below the 50-year average.

Small business owners are struggling with rising prices and uncertain demand in a strong labor market. Despite finding it easier to hire workers, many are putting off their hiring plans due to worries about inflation. The NFIB does not expect the Federal Reserve to lower interest rates in the near future as prices remain high.

The drop in net sales expectations was also a significant factor in the decline of the index. According to Chief Economists William C. Dunkelberg and Holly Wade, small businesses continue to view inflation as their biggest challenge, with 25% citing it as their most important problem. Additionally, 28% of owners have increased their average selling prices.

Wells Fargo economists Sam Bullard and Patrick Barley noted that small businesses are facing these challenges and could impact their outlook in the coming months. Despite some improvements in the labor market, small business optimism is likely to remain suppressed due to these difficulties.