Show-Me State Times

The NFIB Small Business Optimism Index saw a three-point increase in May, reaching 98.8, which is slightly above the long-term average of 98. The rise was mainly driven by improved expectations for business conditions and sales. However, the Uncertainty Index also increased by two points to 94.

"Although optimism recovered slightly in May, uncertainty is still high among small business owners," stated NFIB Chief Economist Bill Dunkelberg. He added that while there are positive expectations regarding business conditions and sales growth, economic uncertainty remains an issue.

NFIB State Director Brad Jones highlighted taxes as a primary concern for members, noting they have surpassed inflation and hiring challenges. "They're thinking about how they'll meet their customers' needs... if they're hit by a massive federal tax hike at the end of the year," he said. Jones urged Congress to make the Small Business Deduction permanent.

Key findings from the survey showed various trends:

- A net 1% of owners found current inventory stocks "too low," marking a seven-point rise from April.

- The net percentage expecting better business conditions rose by 10 points to 25%.

- Owners anticipating higher real sales volumes increased by 11 points to a net 10%.

- Plans for capital outlays over the next six months grew by four points to 22%.

The labor market showed mixed signals with 34% of small business owners reporting unfilled job openings, consistent with April figures. Meanwhile, compensation adjustments varied; a net 26% reported raising compensation in May, down seven points from April.

Other significant concerns included poor sales, reported as a top problem by 9% of owners for five consecutive months. Taxes were identified as the most critical issue by 18% of respondents—the highest level since December 2020 when it was tied with labor quality.

The report indicated some stability in pricing strategies with no change in average selling prices from April to May. Despite this stability, price hikes are planned by a net 31%, reflecting ongoing adjustments in response to economic conditions.

Financing issues saw slight changes; five percent reported financing and interest rates as their main problem—up two points from April—while borrowing activity decreased marginally.

Overall profit trends remained negative at -26%, worsening from April's figures. The reasons cited included weaker sales and rising material costs among others.

Despite these challenges, ten percent considered it an opportune time for expansion—a slight increase but still historically low.

This survey data has been collected regularly since the late '70s and is released monthly on the second Tuesday.