U.S. Small Business Optimism Weakens on Inflation Worries

Confidence among U.S. small businesses weakened unexpectedly in February, as the future path of inflation returned as a top concern.

The National Federation of Independent Business said Tuesday that its small-business optimism index declined to 89.4 from 89.9 in January, flipping expectations of an increase to 90.2 in a poll compiled by The Wall Street Journal.

The index has lagged the 50-year average of 98 for more than two years.

It came as 23% of small businesses reported that inflation was their single most pressing business concern, replacing labor quality as the top problem, according to the NFIB.

“While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates,” NFIB Chief Economist Bill Dunkelberg said.

Small business owners’ plans to fill open positions continue to pull back, with a seasonally adjusted 12% planning to create new jobs in the next three months, the lowest level since May 2020, the data said.

However, more business owners also expected higher real sales volumes, though overall their numbers remained a net negative, the data said.

Meanwhile, the number of businesses raising selling prices also declined, reaching the lowest level since January 2021, NFIB said.

“Goods prices have fallen as expected, but services prices are resisting a decline,” the NFIB report said.

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