The NFIB Small Business Optimism Index increased 0.6 points in February to 90.9 but remains below the 49-year average of 98. Twenty-eight percent of owners reported inflation as their single most important business problem, up two points from last month. Owners expecting better business conditions over the next six months deteriorated two points from January to a net negative 47 percent.

“Small business owners remain doubtful that business conditions will get better in the coming months,” said NFIB Chief Economist Bill Dunkelberg. “They continue to struggle with historic inflation and labor shortages that are holding back growth. Despite their economic challenges, owners are working hard to create new jobs to strengthen the economy and their firms.”

Key findings include:

• Forty-seven percent of owners reported job openings that were hard to fill, remaining historically very high.
• The net percent of owners raising average selling prices decreased four points to a net 38 percent (seasonally adjusted).
• The net percent of owners who expect real sales to be higher improved five points from January to a net negative 9 percent.

As reported in NFIB’s monthly jobs report, 60 percent of owners reported hiring or trying to hire in February. Of those hiring or trying to hire, 90 percent of owners reported few or no qualified applicants for their open positions.

Sixty percent of owners reported capital outlays in the last six months. Of those making expenditures, 40 percent reported spending on new equipment, 26 percent acquired vehicles, and 12 percent spent money on new fixtures and furniture. Eighteen percent of owners improved or expanded facilities and 6 percent acquired new buildings or land for expansion. Twenty-one percent plan capital outlays in the next few months.

A net negative 6 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down two points from January. The net percent of owners expecting higher real sales volumes improved five points to a net negative 9 percent.

The net percent of owners reporting inventory increases declined seven points to a net negative 1 percent. Not seasonally adjusted, 13 percent reported increases in stocks and 19 percent reported reductions.

Twenty percent of owners recently reported that supply chain disruptions still have a significant impact on their business. Another 33 percent reported a moderate impact and 34 percent reported a mild impact. Labor supply problems are widespread.

A net negative 4 percent of owners viewed current inventory stocks as “too low” in February, down three points. By industry, shortages are the most frequent in manufacturing (10 percent), construction (9 percent), finance (9 percent), and wholesale (9 percent). A net negative 7 percent of owners plan inventory investment in the coming months.

The net percent of owners raising average selling prices decreased four points from January to a net 38 percent (seasonally adjusted), the lowest since April 2021. Unadjusted, 12 percent of owners reported lower average selling prices and 50 percent reported higher average selling prices.

Price hikes were the most frequent in retail (64 percent higher, 9 percent lower), finance (63 percent higher, 16 percent lower), manufacturing (59 percent higher, 10 percent lower), and wholesale (57 percent higher, 9 percent lower). Seasonally adjusted, a net 25 percent plan price hikes.

Seasonally adjusted, a net 46 percent of owners reported raising compensation. A net 23 percent plan to raise compensation in the next three months. Twelve 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 was a net negative 23 percent. Among the owners reporting lower profits, 23 percent blamed weaker sales, 23 percent blamed the rise in cost of materials, 17 percent cited the usual seasonal change, 13 percent cited labor costs, 10 percent cited lower prices, and 3 percent cited higher taxes or regulatory costs. For owners reporting higher profits, 55 percent credited sales volumes, 14 percent cited higher prices, 13 percent cited usual seasonal change, and 5 percent cited lower labor costs.

Three percent of owners reported that their borrowing needs were not satisfied. Twenty-five percent reported all credit needs met and 62 percent said they were not interested in a loan. A net 5 percent reported their last loan was harder to get than in previous attempts.