The NFIB Small Business Optimism Index declined in January to 95.0, down 0.9 from December and three points below the 47-year average of 98. Owners expecting better business conditions over the next six months declined seven points to a net negative 23 percent, the lowest level since November 2013. The net percent of owners expecting better business conditions has fallen 55 points over the past four months.

“As Congress debates another stimulus package, small employers welcome any additional relief that will provide a powerful fiscal boost as their expectations for the future are uncertain,” said NFIB Chief Economist Bill Dunkelberg. “The COVID-19 pandemic continues to dictate how small businesses operate and owners are worried about future business conditions and sales.”

Key findings include:

• Four of the 10 Index components declined, two improved and four were unchanged.
• The NFIB Uncertainty Index decreased 2 points to 80.
• Sales expectations for the next three months declined 2 points to a net negative 6 percent.
• Earnings trends over the past three months declined 2 points to a net negative 16 percent reporting higher earnings compared to the prior period.

NFIB’s monthly jobs report showed job growth continued in January. Firms increased employment by 0.36 workers per firm on average over the past few months, up from 0.30 in December, a strong 2-month performance. However, the hiring remains uneven geographically and by industry.

Fifty-one percent of owners reported hiring or trying to hire in January, unchanged from December. Owners have plans to fill open positions, with a seasonally adjusted net 17 percent planning to create new jobs in the next three months.

Up three points from December, 55 percent of owners reported capital outlays in the next six months. Of those making expenditures, 41 percent reported spending on new equipment, 27 percent acquired vehicles, and 15 percent improved or expanded facilities. Five percent of owners acquired new buildings or land for expansion and 12 percent spent money on new fixtures and furniture. Twenty-two percent of owners’ plan capital outlays in the next few months, unchanged from December but still low.

A net negative 7 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 5 points from December. The net percent of owners expecting higher real sales volumes decreased 2 points to a net negative 6 percent, overall, not a positive picture.

The net percent of owners reporting inventory increases rose 2 points to a net negative 4 percent. Owners viewing current inventory stocks as “too low” decreased 2 points in January to a net 5 percent, matching the decline in the percent of firms reporting higher inventories. A net 4 percent of owners plan inventory investment in the coming months.  Overall, a positive inventory picture.

Owners raising average selling prices increased 1 point to a net 17 percent (seasonally adjusted). Eleven percent reported lower average selling prices and 27 percent reported higher average prices.

Price hikes were the most frequent in wholesale (40 percent higher, 6 percent lower) and retail (27 percent higher, 10 percent lower). Seasonally adjusted, a net 28 percent plan price hikes, up six points from December.

A net 25 percent of owners (seasonally adjusted) reported raising compensation (up four points) and a net 17 percent plan to do so in the coming months (up three points). Only seven percent of owners cited labor costs as their top business problem and 21 percent said that labor quality was their top business problem.

The frequency of reports of positive profit trends decreased 2 points to a net negative 16 percent reporting quarter on quarter profit improvement. Among owners reporting lower profits, 43 percent blamed weaker sales, 17 percent cited the usual seasonal change, 6 percent cited a higher cost of materials, 6 percent cited labor costs, and 5 percent cited lower prices. For owners reporting higher profits, 60 percent credited sales volumes, 17 percent cited usual seasonal change, and 8 percent cited higher prices.

Only 2 percent of owners reported that all their borrowing needs were not satisfied, down one point from December. Twenty-two percent reported all credit needs met and 61 percent said they were not interested in a loan. A net 1 percent of owners reported their last loan was harder to get than in previous attempts.

One percent reported that financing was their top business problem. The net percent of owners reporting paying a higher rate on their most recent loan was negative 4 percent, up one point from December, a friendly lending market.

View the full full report here.