The NFIB Small Business Optimism Index saw a slight decrease in June, dropping by 0.2 points to 98.6, which remains above the long-term average of 98. The decline was mainly attributed to an increase in reports of excess inventories. Meanwhile, the Uncertainty Index fell by five points to 89.
Taxes continue to be the primary concern for small business owners, with 19% identifying it as their top issue, marking a one-point increase from May. This is the highest level since July 2021. "Small business optimism remained steady in June while uncertainty fell," said NFIB Chief Economist Bill Dunkelberg. "Taxes remain the top issue on Main Street, but many others are still concerned about labor quality and high labor costs."
Inventory levels were a significant factor in the index's performance. A net negative 5% of owners considered their inventory stocks too low, down six points from May. Additionally, 12% reported inventories as too high in June compared to 7% in May.
Expectations for better business conditions decreased by three points to a net 22%, although this remains positive against historical averages. Plans for capital outlays over the next six months dropped slightly to 21%.
Labor quality concerns persisted at 16%, unchanged from May, aligning with broader economic data suggesting a moderated labor market. Inflation concerns also eased, with only 11% citing it as their main problem, down three points from May.
Business health indicators showed some deterioration; those reporting excellent or good health declined significantly. Job openings that could not be filled rose slightly to 36%, and compensation increases were reported by a net 33% of owners.
Plans for price increases were noted by a net 32%, reflecting ongoing pricing pressures despite easing inflation concerns. Profit trends improved marginally, though challenges such as weaker sales and material costs remained.
Financing issues were less prevalent, with only 3% citing it as their top problem. However, borrowing activity increased slightly.
Overall expansion plans saw minor improvement but remained historically low at just 11%. Government regulations and competition from large businesses also featured among owner concerns.
The NFIB has been conducting these surveys since the late '70s and releases its findings monthly.
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