Optimism among small business owners declined in December due to concerns about inflation and the economy falling into recession, the National Federation of Independent Business found in a survey released Tuesday.
The NFIB’s Small Business Optimism Index fell in December to 89.8 – its lowest level since June. It marked the 12th straight month that the business lobby’s index was below the 49-year average of 98.
“Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Owners are managing several economic uncertainties and persistent inflation and they continue to make business and operational changes to compensate.”
The single most important factor facing businesses is inflation, according to 32% of small business owners, up from 22% a year ago. Inflation in November was 7.1%, down from a 41-year high of 9.1% in June but still well above the Federal Reserve’s target rate of 2%.
The political climate in the U.S. was the second-most common reason given for not expanding, with 9% of small business owners citing it.
Higher prices contributed to a decline in sales expectations for small business owners over the next three months, reaching a negative 10% in the survey, a decline of 2 percentage points compared with November.
The Fed has imposed a series of interest-rate hikes to try to bring down inflation, raising the cost of borrowing for businesses and consumers.
The business outlook for the next six months among small business owners worsened by eight percentage points compared with November. Only 5% of small business owners said the next three months are a “good time to expand,” a level that is mostly unchanged in recent months.
Among small business entrepreneurs, 55% tried to hire employees in December, but 93% of that group reported having few or no qualified candidates to fill jobs.
Roughly four out of 10 small business owners said they weren’t able to fill job openings last month.