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Macro Flash Report

Small Business Optimism

Takeaway:

January data from the NFIB Small Business Survey showed a slight retreat in optimism, with rising uncertainty following a strong report in December. As seen in the chart below (red circles), the Uncertainty Index typically spikes during presidential elections and normalizes once results are solidified. However, the index has quickly rebounded, likely suggesting increased uncertainty around policy, as reflected in a decline in capital investment plans.

 

NFIB Small Business Optimism & Uncertainty Index

In January, the NFIB Small Business Optimism Index declined to 102.8, ending a four-month streak of gains that peaked at a multi-year high of 105.1 in December, and missing the market expected 104.7. Despite this downturn, the index remained above the 51-year average of 98 for the third consecutive month, indicating that small business owners remain optimistic, though uncertainty is increasing. The Uncertainty Index rose by 14 points to 100, marking the third highest reading recorded after two months of declining. Owners pointed to ongoing hiring difficulties, and fewer planned capital investments as they prepare for the months ahead.

 

Of the 10 components, 7 decreased, 1 increased, and 2 remained unchanged. Key findings include:

  • The net percent of owners expected the economy to improve dropped to 47% (-5 points).
  • 20% (-7 points) plan capital outlays in the next six months, the biggest contributor to this month’s downturn.
  • 18% (-2 points) reported that inflation was their single most important issue in operating their business, matching labor quality as the top issue and the lowest since November 2021.
  • Owners raising average selling prices fell to 22% (-2 points), while a net 26% (-2 points) plan price hikes in January.
  • 35% (unchanged) of owners reported job openings they could not fill in the current period.
  • Owners reporting that their last loan was harder to get than in previous attempts fell to 3% (-1 point), the lowest since June 2022.
  • 0% (-6 points) plan inventory investment in the coming months, a notably retreat from the prior month’s 3 year high.