The NFIB Small Business Optimism Index declined 2.6 points in November to 101.4 but remains well above the 47-year historical average reading of 98. Six of the 10 Index components declined and four increased. The NFIB Uncertainty Index decreased 8 points to 90, still a historically high reading. Owners expecting better business conditions over the next 6 months declined 19 points to a net 8 percent.

“Small business owners are still facing major uncertainties, including the COVID-19 crisis and the upcoming Georgia runoff election, which is shaping how they’re viewing future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses.”

Key findings include:

• Earnings trends over the past three months declined 4 points to a net negative 7 percent reporting higher earnings quarter over quarter.
• Inventory investment plans for the next three to six months decreased 7 points from a 48-year record high of a net 12 percent in October to a net 5 percent in November.

As reported in NFIB’s November jobs report, finding qualified employees remains a problem for small business owners with 89 percent of those hiring or trying to hire reporting few or no “qualified” applicants for the positions they were trying to fill. Twenty-seven percent of owners reported few qualified applicants for their open positions and 20 percent reported none.

Six percent of owners cited labor costs as their top business problem (down 2 points), but 24 percent said that labor quality was their top business problem (up 2 points), exceeding the percentages that selected taxes, regulations, and weak sales as their top problem.

Fifty-three percent reported capital outlays in the last six months, unchanged from October’s reading. Of those making expenditures, 38 percent reported spending on new equipment (up 2 points), 24 percent acquired vehicles (up 4 points), and 17 percent improved or expanded facilities (up 1 point). Five percent acquired new buildings or land for expansion (unchanged) and 13 percent spent money on new fixtures and furniture (up 1 point). Down 1 point from October, 26 percent of owners plan capital outlays in the next few months.

A net 5 percent of all owners (seasonally adjusted) reported higher nominal sales in the past 3 months, down 1 point from October but holding at the current recovery level. The net percent of owners expecting higher real sales volumes decreased 1 point to a net 10 percent of owners, a solid reading.

The net percent of owners reporting inventory increases rose 1 point to a net negative 4 percent. The net percent of owners viewing current inventory stocks as “too low” remained at 5 percent, up 1 point from October. Plans to invest in more inventory accumulation collapsed from record levels as expected business conditions weakened, falling 7 points to a net 5 percent of all firms.

The net percent of owners raising average selling prices increased 3 points to a net 18 percent (seasonally adjusted). Unadjusted, 8 percent of owners reported lower average selling prices and 23 percent reported higher average prices.

Price hikes were the most frequent in retail (28 percent higher, 4 percent lower) and wholesale (23 percent higher. 7 percent lower). Seasonally adjusted, a net 21 percent of owners plan price hikes (up 1 point).

A net 24 percent of owners reported raising compensation, and a net 20 percent plan to do so in the coming months.

The frequency of reports of positive profit trends decreased 4 points to a net negative 7 percent reporting quarter-on-quarter profit improvement, historically a favorable reading. Among owners reporting weaker profits, 55 percent blamed weak sales, 8 percent cited usual seasonal change, 8 percent cited a higher cost of materials, 6 percent cited lower prices, and 3 percent cited labor costs. For owners reporting higher profits, 73 percent credited sales volumes, 9 percent cited usual seasonal change, and 8 percent cited higher prices.

Two percent of all owners reported that all their borrowing needs were not satisfied, 25 percent reported all credit needs were met, and 58 percent said they were not interested in a loan. A net 2 percent reported their last loan was harder to get than in previous attempts.

One percent of owners reported that financing was their top business problem, unchanged from last month. The net percent of owners reporting paying a higher rate on their most recent loan was negative 4 percent, up from negative 6 points in October. Twenty-two percent of all owners reported borrowing on a regular basis, down 3 points.

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