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Small Business Optimism on the Rise

The National Federation of Independent Business (NFIB) Optimism Index increased 2.9 points in June to 102.5, the first time the Index exceeded 100 since November 2020. Seven of the 10 Index components improved and three declined. The NFIB Uncertainty Index increased four points to 83.

“Small businesses optimism is rising as the economy opens up, yet a record number of employers continue to report that there are few or no qualified applicants for open positions,” said NFIB Chief Economist Bill Dunkelberg. “Owners are also having a hard time keeping their inventory stocks up with strong sales and supply chain problems.”

Other key findings include:

Owners expecting better business conditions over the next six months rose 14 points to a net negative 12 percent, an improvement but still in very negative territory.Earnings trends over the past three months improved six points to a net negative 5 percent.The net percent of owners raising average selling prices increased seven points to a net 47 percent (seasonally adjusted), the highest reading since January 1981.

As reported in NFIB’s monthly jobs report, 46 percent of owners reported job openings that could not be filled, a decrease of two points from May but still historically high and above the 48-historical average of 22 percent. Small employers have plans to fill open positions, job creation plans over the next three months rose to a net 28 percent, up one point.

A net 39 percent (seasonally adjusted) reported raising compensation, a record high. A net 26 percent plan to raise compensation in the next three months.

Eight percent of owners cited labor costs as their top business concern and 26 percent said that labor quality was their top business problem, unchanged from May but remaining the top overall concern.

The frequency of reports of positive profit trends improved six points to a net negative 5 percent, driven primarily by the increase in sales. Among owners reporting lower profits, 35 percent blamed weaker sales, 25 percent cited a rise in the cost of materials, 9 percent cited labor costs, 9 percent cited lower prices, 8 percent cited the usual seasonal change, and 5 percent cited higher taxes or regulatory costs. For owners reporting higher profits, 66 percent credited sales volumes, 13 percent cited usual seasonal change, and 9 percent cited higher prices.

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