Small-business owners in the U.S. grew more upbeat in June as expectations for business conditions in the short term improved, although supply and labor shortages continued to constrain activity.
The NFIB Small Business Optimism Index came in at 102.5 in June, up 2.9 points from the previous month, according to a survey compiled by the National Federation of Independent Business released Tuesday.
The reading, which is the highest since November 2020, beats the 100.0 level expected by economists polled by The Wall Street Journal. The index is close the pre-pandemic and pre-presidental election levels of around 104.
“Small businesses optimism is rising as the economy opens up, yet a record number of employers continue to report that there are few or no qualified applicants for open positions,” NFIB chief economist Bill Dunkelberg said. Owners also are struggling to keep their inventory stocks up with strong sales and supply chain problems, he said.
The NFIB is a monthly snapshot of small businesses in the U.S., which account for nearly half of private sector jobs. Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy.
Seven of the 10 components that form the index improved in June, while three decreased compared with May.
The increase of the headline confidence index was driven mainly by a rise of the proportion of owners who expect that the economy will improve in the short-term. Despite the improvement, the measure is still in very negative territory. Earnings trends over the past three months also improved, as they did expectations of higher sales volumes.
Small businesses continued to encounter difficulties to find workers and fill open positions. Around 46% of owners reported job openings that couldn’t be filled, a decrease of two points from May but historically very high.
“Many firms can’t hire enough workers to efficiently run their businesses, restricting sales and output,” the report said.
Job creation plans increased slightly in June, as well as the number of owners who think currently it is a good time to expand.
The services sector is making a strong recovery in employment as the economy opens up, but still more people are needed to fill vacant jobs, Mr. Dunkelberg said.
A net 11% of owners view current inventory stocks as too low in June, up three points from May and historically a record high. The same proportion of owners plan inventory investment in the coming months, up five points from May and also a record high.
In June, the percentage of respondents raising average selling prices increased seven points to 47%, the highest reading since January 1981, the data showed. Price increases were most frequent in wholesale, construction, retail and manufacturing.
“The incidence of price hikes on Main Street is clearly on the rise as owners pass on rising labor and operating costs to their customers,” the report said.
Source: Dow Jones