The January NFIB Small Business Optimism Index was reported at 97.1, down 1.8 points. This is the lowest reading for the Index since the February 2021 reading of 95.8. Additionally, small businesses continue to have a dim view of the economy with more small businesses expecting a worsening economy by 33 points versus an improving one.
According to the survey, "a net 7% of owners viewed current inventory stocks as “too low” in January, down two points. A net 3% of owners plan inventory investment in the coming months, down five points from December, reflecting the success in inventory building in the fourth quarter." This improving inventory situation may take the pressure off inflation. It is too early to tell but this is a positive data point. In the survey though, inflation was cited as an issue. The report notes, " Inflation remains a problem for small businesses as 22% of owners reported that inflation was their single most important business problem, unchanged from December when it reached the highest level since 1981. The net percent of owners raising average selling prices increased four points to a net 61% (seasonally adjusted), the highest reading since the fourth quarter of 1974."
Although the inventory situation seems to be improving and moving in a positive direction, inflation remains an issue in the near term for sure and is an important factor contributing to weaker business optimism.
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