The latest survey from the National Federation of Independent Businesses (NFIB) reveals that inflation remains a primary concern for small business owners, contributing to a decline in optimism in February.
According to the NFIB’s Optimism Index, which fell to 89.4 in February, inflation has been a persistent issue for small businesses, with the index remaining below the 50-year average of 98 for 26 consecutive months. In February, 23% of small business owners cited inflation as their top problem, marking a three-point increase from January when labour quality was the primary concern.
The inflationary pressures persist, with prices rising by 0.4% from January to February, as reported by the Labor Department. Compared to the previous year, consumer prices rose by 3.2% last month, slightly higher than in January.
Core inflation, excluding food and energy prices, also climbed by 0.4% from January to February, indicating a faster pace than necessary to bring inflation down to the Federal Reserve’s 2% target. This core inflation rate is closely monitored to gauge future inflation trends.
Amidst these challenges, small business owners are tightening their spending. The survey found that 54% of owners reported capital outlays in the last six months, a five-percentage-point decrease from January. Of those making expenditures, 35% invested in new equipment, 23% acquired vehicles, and 15% improved or expanded facilities.
The persistent inflationary environment poses significant challenges for small businesses, impacting their optimism and spending decisions as they navigate uncertain economic conditions.
