Macro Flash Report

 NFIB Small Business Optimism

Details from this mornings NFIB Small Business Optimism report clearly highlight some of the headwinds that we have referenced in the industrial sector because of sustained level of restrictive interest rates. In short, uncertainty remains high while current activity and near-term expectations appear to have bottomed and are trending higher.

**While this is not traditional a closely watched data release for the steel sector – we would advocate that it could provide insight over the coming months as to how business are reacting to “higher for longer” interest rate environment.

Small Business Optimism (white) & Uncertainty (blue)

In May, the NFIB Small Business Optimism index rose to 90.5, above expectations of a flat print at 89.7 and the highest level this year. While this is an encouraging print, it is important to take a step back and recognize that there is still a long road to stability – the index remains below the historical average of 98 for the 29th consecutive month.

The Uncertainty index climbed by nine points to 85, the highest since November 2020, driven mainly by inflation concerns, particularly around wage pressures as small businesses struggle to manage this rising input costs compared to larger corporations.

Support for this concern can be seen in last week’s data, where May’s Average Hourly Earnings MoM, increased by 0.4%, surpassing the market expected 0.3%, notably up from the prior month’s 0.2%.

Other key findings from the NFIB survey include:

  • A net negative 8% of owners considered their current inventory stocks “too low,” the lowest since October
  • Hiring plans rose to a net 15%, the highest for the year, indicating a cautious optimism in workforce
  • A net 28% of owners plan to increase prices, up two points from April, suggesting continued inflationary
  • Financing was reported as the top business problem by 6% of owners, the highest since June 2010, reflecting growing concerns about access to capital.