Small business optimism reaches highest point in two years in July

The NFIB Small Business Optimism Index hit its highest level since February 2022, as it rose 2.2 points in July to 93.7.

While climbing, the index came in below the 50-year average of 98 for the 31st consecutive month.

“Despite this increase in optimism, the road ahead remains tough for the nation’s small business owners,” NFIB Chief Economist Bill Dunkelberg said. “Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line. Owners are heading towards unpredictable months ahead, not knowing how future economic conditions or government policies will impact them.”

Among the key findings, inflation remains the top issue among small business owners, with 25 percent reporting it as their single most important problem in operating their business — up four points from June.

Also, it found that 33 percent reported raising compensation in July, down five points from June and the lowest reading since April 2021. Further, 2 percent of owners plan inventory investment in the coming months, up four points from June. The last time inventory investment plans were positive was in October 2022. In addition, the percentage of owners expecting higher real sales volumes rose four points in July to a net negative 9 percent — the highest reading of this year.

Additionally, the percentage of owners raising their average selling prices fell five points from June to a seasonally adjusted net 22 percent, while 24 percent plan price hikes in July, down two points. This is the lowest reading since April 2023.

Also, 38 percent reported job openings they could not fill in the current period, up one point from June. Of the 57 percent of owners trying to hire in July, 86 percent reported few or no qualified applicants for the positions they were trying to fill.

In addition, 54 percent of owners reported capital outlays in the last six months, up two points from June. Of those making expenditures, 36 percent were spending on new equipment, 22 percent acquired vehicles, and 15 percent improved or expanded facilities.

Further, the net percentage of owners reporting inventory gains fell six points to a net negative 9%, the lowest since August 2020.

The index is produced by the National Federation of Independent Businesses. The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986.

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