The NFIB Optimism Index fell 0.1 points in May to 93.1, marking the fifth consecutive month below the 48-year average of 98. Owners expecting better trading conditions over the next six months have declined by four points to a net negative of 54%, the lowest level recorded in the 48-year survey. Expectations for better trading conditions have worsened each month since January.
28% of owners reported that inflation was their most important concern in running their business, down four points from April. The net percentage of owners who raised average selling prices increased by two points to a net 72% (seasonally adjusted), returning to the highest reading in the 48-year survey history last reached in March and 32 points more than in May 2021.
“Inflation continues to outstrip the offsetting that has reduced real incomes nationwide,” said Bill Dunkelberg, chief economist at the NFIB. “Small business owners remain very pessimistic about the second half of the year as supply chain disruptions, inflation and labor shortages are not easing.”
State-specific data isn’t available, but NFIB state director Rosemary Elebash said jobs remain a critical issue for small businesses in Alabama. Unemployment has dropped to 2.8 percent, the lowest level in the state’s history, but members of our small businesses say they still can’t find enough people to work. Employers are willing to train people, but they say no one is applying and, since they don’t have enough people to work, they still have to cut the hours and limit the services they provide. “
Other key findings from the national survey include:
- 51% of owners reported vacancies that could not be filled, a four-point increase from April.
- The net percentage of owners expecting an increase in real sales has fallen three points since April to a net negative 15 percent.
- A net (seasonally adjusted) 46% of owners reported increasing compensation, down three points from April with a net 25% planning to increase compensation over the next three months, down two points from April but historically tall.
- 39% of owners say supply chain disruptions have had a significant impact on their business, up by three points. Another 31% report a moderate impact and 22% report a mild impact. Only 8% of owners report no impact from recent supply chain disruptions.
As reported in the NFIB’s monthly employment report, labor markets are tight as 51% (seasonally adjusted) of all landlords said they could not fill job opportunities in the current period. 92% of those hiring or seeking to hire reported few or no qualified candidates for the positions they were seeking to fill. 12% of owners cited labor costs as their main business problem. 23% said the quality of work was the main business problem, behind inflation.
Unadjusted, 3% of owners reported lower average selling prices and 71% reported higher average selling prices. Price increases were the most frequent in wholesale (80% up, 4% down), manufacturing (79% up, 1% down), retail (78% up, 2 % less) and in construction (77% more, 2% less).
53% of owners reported capital outlays in the past six months, down one point from April. Of those owners who made purchases, 36% said they spent on new equipment, 21% bought vehicles, and 15% upgraded or expanded facilities. 6% of owners acquired new buildings or land for expansion and 12% spent money on new fixtures and furniture. 25% of owners plan capital expenditures in the coming months, down two points compared to April.
One percent of owners (seasonally adjusted) reported higher nominal sales over the past three months, down two points from April. The net percentage of owners expecting higher real sales volumes fell by three points to a net negative 15 percent.
The net percentage of owners reporting inventory increases fell five points to a net negative 1%. 17% of owners reported inventory increases while 15% reported decreases as solid sales reduced the inventory of many businesses. Net 8% of owners considered current inventories to be “too low” in May, up two points from April. Net 1% of owners plan inventory investments in the coming months.
The frequency of reporting of positive earnings trends was net negative 24%, down seven points from April. Of owners reporting lower profits, 34% blamed the cost of materials rising, 25% blamed weaker sales, 10% cited labor costs, 9% cited customary change seasonal, 8% cited the lowest prices and 3% cited the highest taxes or regulatory costs. For owners reporting higher profits, 49% credited sales volumes, 18% cited higher prices, and 16% cited normal seasonal change.
Two percent of homeowners reported that all of their loan needs had not been met. 22% said all credit needs were met and 65% said they were not interested in a loan. A net 4% reported that their latest loan was more difficult to obtain than previous attempts. One percent of owners reported financing was their main business problem. A net 14% of homeowners reported paying a higher rate on their most recent loan, down two points from April.