In February, the NFIB Optimism Index fell 1.4 points to 95.7, the second month in a row below the 98-for-48 average. Twenty-six percent of owners said inflation was their biggest problem running their business, a four-point increase since December and the highest reading since the third quarter of 1981.
“Inflation continues to be an issue on Main Street, leading more homeowners to raise selling prices again in February,” said NFIB chief economist Bill Dunkelberg. “Supply chain disruptions and labor shortages also remain issues, driving down revenue and sales for many.”
State-specific numbers aren’t available, but NFIB state director Rosemary Elebash said, “It’s undeniable that Alabama’s economy is stronger than it was. after the COVID-19 shutdown began two years ago this month, but inflation and supply chain disruptions and a lack of skilled job seekers are preventing small businesses from recovering completely.
Key findings from the national survey include:
The net percentage of owners raising average selling prices rose seven points to 68% net (seasonally adjusted), a 48-year high.
Owners expecting better business conditions over the next six months fell two points to a negative net result of 35%.
Forty-eight percent of owners reported vacancies that could not be filled, up one point from January.
Inventory accumulation plans fell one percentage point, after falling five points in January, following massive inventory build-up in the fourth quarter.
Price bullish activity over the past 12 months has continued to escalate, reaching levels not seen since the early 1980s, when prices were rising at double-digit rates. Unadjusted, 4% of owners reported lower average selling prices and 68% reported higher average prices. Price increases were most frequent in retail trade (79% more, 4% less), wholesale trade (77% more, 4% less), construction (73% more, 3% less). % less) and manufacturing (72% more, 6% less). ). Seasonally adjusted, 46% of owners expect price increases.
As announced last week in NFIB Monthly Jobs Report, 48% of all owners reported job openings they were unable to fill in the current period. Ninety-three percent of owners who are hiring or trying to hire reported few or no qualified candidates for their open positions.
Fifty-seven per cent of owners reported capital spending in the past six months, down one point from January. Among owners who incurred expenses, 41% said they purchased new equipment, 21% acquired vehicles, and 14% upgraded or expanded facilities. Seven percent acquired new buildings or land for expansion and 11 percent spent money on new fixtures and furniture. Twenty-seven percent of owners expect capital spending in the coming months, down two points from January.
Seasonally adjusted, a net 0% of all owners reported higher nominal sales over the past three months, down two points from January. The net percentage of owners expecting higher actual sales volumes fell three points to a negative net result of 6%.
The net percentage of owners reporting inventory increases fell four points to a historically high 5% net. Eighteen percent of owners reported increases in inventory while 18% reported reductions.
Thirty-seven percent of owners say supply chain disruptions have had a significant impact on their business. Another 33 percent report moderate impact and 21 percent report mild impact. Only 8% of owners report no impact from recent supply chain disruptions.
A net 7% of owners viewed current inventory as “too low” in February, unchanged from a month ago. A net 2% of owners plan to invest in stocks in the coming months.
Seasonally adjusted, 45% of owners said they had increased their compensation, down five points from January’s record of 48 years. 26% of owners plan to increase their compensation in the next three months. Eleven percent of owners cited labor costs as their top business issue and 22% said the quality of labor was their top business issue.
The frequency of reporting positive earnings trends was negative at 17%. Of owners reporting lower profits, 28% blamed rising cost of materials, 28% blamed lower sales, 8% cited labor costs, 15% cited usual seasonal change , 7% cited lower prices and 1% cited higher taxes or regulatory costs. For owners reporting higher profits, 50% credited sales volumes, 18% cited the usual seasonal change, and 17% explicitly cited higher prices.
Two percent of homeowners said all of their borrowing needs were not met. Twenty-five percent said all of their credit needs were met and 60% said they weren’t interested in a loan. A net 2% said their latest loan was harder to get than previous attempts. Zero percent said funding was their top business issue. A net 6% of homeowners said they paid a higher rate on their most recent loan, up two points from January.
The NFIB Research Center has collected data on small business economic trends with quarterly surveys since the 4th quarter of 1973 and monthly surveys since 1986. Respondents to the surveys are randomly drawn from NFIB members. The report is released on the second Tuesday of each month. This survey was conducted in February 2022.