The NFIB Small Business Optimism Index saw a slight decline in June, dropping by 0.2 points to 98.6, which remains above the long-term average of 98. The decrease was largely attributed to an increase in reports of excess inventories. Meanwhile, the Uncertainty Index decreased by five points from May to 89.
Taxes continue to be the primary concern for small business owners, with 19% identifying it as their most significant issue, marking a one-point increase from May and matching levels last seen in July 2021. Bill Dunkelberg, NFIB Chief Economist, noted that "small business optimism remained steady in June while uncertainty fell," emphasizing that taxes are a persistent concern alongside labor quality and costs.
In terms of inventory assessments, there was a net negative perception among owners regarding current stock levels being too low. This aspect significantly contributed to the decline in the Optimism Index.
Expectations for better business conditions and higher real sales volumes both fell by three points from May. Capital outlay plans for the next six months also saw a minor decline.
Labor quality issues remain unchanged at 16%, aligning with broader economic indicators suggesting a more balanced labor market. Inflation concerns have lessened, with only 11% citing it as their main problem—a drop of three points from May and the lowest since September 2021.
The health of businesses showed some deterioration; fewer respondents reported excellent or good health compared to previous months. Job openings remained challenging to fill for many owners despite an increase in hiring intentions.
Compensation trends indicated upward movement with a net increase in those reporting raised compensation—the largest rise since January 2020—though future compensation plans slightly dipped.
Capital expenditures were lower than previous months, reaching their lowest point since August 2020. Among those investing, spending on new equipment was predominant.
Reports of poor sales as a top issue rose marginally after several stable months. Inventory gains experienced declines contributing further to the overall index dip.
Price increases are anticipated by more owners than previously recorded this year; selling prices have also risen notably compared to earlier months.
Profit trends improved slightly but remain negative overall; various factors including weaker sales and rising material costs were cited as reasons for lower profits while higher sales volumes supported profit growth for others.
Financing issues were less prominent this month with fewer citing it as their top problem; however, borrowing activity increased slightly along with interest rates on recent loans.
Expansion sentiment showed minor improvement yet remains historically low despite these gains.
Overall concerns about government regulations stayed consistent while competition from larger businesses became more pronounced among small business challenges identified by owners surveyed during June's assessment period conducted by NFIB Research Center.
