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NFIB: Small Business Optimism Improves, But Inflation Concerns Skyrocket

  • National Federation of Independent Business’s Small Business Optimism Index shows slight improvement in December
  • 22 percent of respondents name inflation as the most important problem they’re facing, up 20 points from the start of 2021 and the highest reading since 1981
  • 36 percent said supply chain disruptions have had a significant impact on their business, though fewer small business owners are saying that their inventory stocks are too low

Summary by Dirk Langeveld

Small business owners’ optimism improved in December, with the National Federation of Independent Business Small Business Optimism Index rising 0.5 points from November to 98.9. At the same time, the share of small business owners saying they were concerned about inflation hit its highest reading in 40 years.

A total of 22 percent of respondents named inflation as the most important problem they were facing, up 20 points from the start of 2021. This was the highest percentage since NFIB’s survey for the fourth quarter of 1981.

“Small businesses unfortunately saw a disappointing December jobs report, with staffing issues continuing to impact their ability to be fully productive,” said Bill Dunkelberg, chief economist at NFIB. “Inflation is at the highest level since the 1980s and is having an overwhelming impact on owners’ ability to manage their businesses.”

Other findings included:

  • A net negative share of 35 percent expect better business conditions in the next six months; while this was up three points from November, it fell 23 points in the previous six month
  • 57 percent made capital outlays in the past six months, a gain of two points from November; investments were concentrated on new equipment (41 percent), new vehicles (25 percent), and the expansion or improvement of facilities (19 percent)
  • 29 percent plan to make capital outlays in the next few months, up two points from November
  • A net 1 percent of respondents, seasonally adjusted, say they have seen higher nominal sales in the past three months; a net share of 3 percent expect higher real sales
  • 36 percent said supply chain disruptions have had a significant impact on their business, while 30 percent said they have had a moderate impact and 21 percent said they have had a mild impact
  • A net share of 9 percent said their inventory stocks are too low, down six points from November
  • A net share of 57 percent said they have raised their average sales prices, down two points from November
  • A net negative share of 14 percent reported positive profit trends
  • 29 percent of those with lower profits blamed the higher cost of materials, while 22 percent cited weaker sales and 17 percent said higher labor costs are cutting into their profits; among those with higher profits, 63 percent credited greater sales volumes

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