Small business optimism ends 2022 near lowest level since 2013 due to inflation

Optimism among small business owners eased in December to near the lowest level since 2013, as the outlook for inflation and hiring worsened in the final month of last year.

The National Federation of Independent Business’ (NFIB) optimism index fell to 89.8 last month from 91.9 in November, the group said in a report Tuesday. Eight of the index’s 10 components fell in December.

Only a June 2022 reading of 89.5 prevented Tuesday’s report from hitting a fresh 10-year low.

“Overall, small business owners are less optimistic about 2023 as sales and business conditions are expected to deteriorate,” NFIB chief economist Bill Dunkelberg said in the report.

Inflation remains the most important issue affecting small businesses, with 32% of business owners marking it as the biggest issue facing their company.

Small businesses have passed some of the costs on to customers, but the urge appears to be waning. The net share of homeowners raising average selling prices fell to 43%, the lowest level since May 2021, while 24% of homeowners planned to raise prices, down from November’s figure.

Some economists said that while there were signs of easing price pressures, it was not enough to add to optimism.

“A slump in natural gas prices is usually enough to boost sentiment among small business owners, but right now the shock from rising interest rates and stock market volatility is more powerful,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “release. “As a result, the index is now at levels where recessions have occurred in the past.”

Labor remains the second-biggest issue for small businesses, with 41% of business owners reporting they are unable to fill job openings in the current period.

55% of business owners reported hiring or attempting to hire in December, and of those businesses that were hiring or attempting to hire, 93% said they had few or no qualified applicants for open positions.

Still, the survey’s hiring metric remains high, with an adjusted net 17 percent of small businesses (or the difference between those planning to increase headcount and those planning to reduce headcount) planning to create new jobs in the next three months Chance. However, this figure is down from 32% in August 2021.

“The widely expected (forecast) recession did not arrive in 2022, but is still expected to arrive this year,” the report said. “The downside of a sharp rise in interest rates has yet to be fully felt, with more rate hikes almost certain early this year .”

A net 17% of small businesses plan to add employees, down from last year's high but still high relative to the post-financial crisis recovery.  (Source: NFIB)

A net 17% of small businesses plan to add employees, down from last year’s high but still high relative to the post-financial crisis recovery. (Source: NFIB)

Dani Romero is a reporter for Yahoo Finance.Follow her on Twitter @daniromerotv

Click here for the latest economic news and economic indicators to help you make investment decisions

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app apple or android

Follow Yahoo Finance Twitter, Facebook, instagram, activity board, LinkedInand youtube

Source link