Small business sentiment plummets due to labor worries and rising costs -NFIB report shows greatest decline in 13 months

Small Business Optimism Plummets to Lowest Level Since 2023 as Inflation and Sales Concerns Rise

A recent report published on Tuesday revealed that U.S. small business sentiment reached its lowest point since May 2023 in January. The National Federation of Independent Business monthly sentiment index fell to 89.9 from 91.9 in December, marking the largest decrease since December 2022. This keeps the index below its 50-year average of 98 for a 25th consecutive month.

Small business owners in January cited labor quality and inflation as their top concerns, with sales conditions tightening and the share of owners reporting profit growth falling to a net negative 30% from a net negative 25% in December. In response to these challenges, small business owners are making adjustments to their operations.

Despite these difficulties, the share of owners citing inflation as their top concern dropped by 3 points to 20%. This coincides with the Federal Reserve’s rate hike campaign in 2022 to curb inflation, though the Fed has since signaled that rate hikes are over and it should be in a position to lower rates later this year.

Looking ahead, the portion of owners expecting better business conditions in the next six months fell by two points to negative 38%. Additionally, the share of owners who expect higher real sales decreased by twelve points to negative sixteen percent in January. These statistics paint a sobering picture of the challenges faced by small business owners.

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