March was a brutal month for small business optimism, a data point used to examine how those who own small businesses feel about the future of both their businesses and the economy generally. In the month, the level of small business optimism fell like a rock, plummeting to its lowest level since December of 2012, a more than 11-year low.
That lack of optimism was recorded in a report from the National Federation of Independent Business (NFIB). In the report, small business owners expressed serious worried about inflation, dismal expectations for their future earnings, and generally unoptimistic about their businesses’ futures, particularly from a sales expectations perspective.
According to the NFIB report, the small business optimism index as a whole crashed in March, falling to 88.5 points. That is the lowest since December 2012 and significantly below the 50-year average of 98. Commenting on that general lack of optimism, the NFIB report noted that it has remained under the 50-year average for over two years, much of the Biden Presidency, saying, “This is the 27th consecutive month below the 50-year average of 98. The last time the Index was at or above the average was December 2021. Of the 10 index components, 2 increased, 6 decreased, and 2 were unchanged.”
Among the causes for concern amongst small business owners was expectations for higher sales volume, which is at a dismal -18%, with owners largely pessimistic. Another dismal expectation of small business owners came in the realm of expectations of future earnings. According to the NFIB report, small business owners have extremely pessimistic expectations for future earnings, -36%.
Similarly, inflation, a persistent problem under the Biden Administration, remains a concern among the small business owners surveyed, with 25% of small business owners saying that inflation was the biggest issue they faced in running their businesses. Further, 28% of them said they had to raise selling prices in March to account for inflation.
Though inflation was the top problem, it wasn’t the only major issue that small business owners reported facing. 18% of those polled said that the biggest issue with which they struggle is labor quality. Particularly, employers in industries like construction and services said that they struggled to find employees to fill open positions.
Posting about the dismal report on X, “The Quant Guy,” a finance-focused account, said, “The US’s NFIB Small Business Optimism Index fell for a third consecutive month to 88.5 in March 2024, the lowest since December 2012 and well below forecasts of 90.2. I am not surprised by this trend. We are experiencing a bifurcated America, with big capitalization companies in the Tech space achieving outstanding results. In contrast, small-cap companies struggle under the weight of inflation and labor shortage.”
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The account added, “As for the Federal Reserve, Powell should consider inflation the most significant contributor to this lousy small business sentiment. Inflation has once again been reported as the top business problem on Main Street, and the labor market has only eased slightly. Our government is counter-balancing tight monetary policy with a loose fiscal policy that keeps aggregate demand buoyant, preventing inflation from falling.”