Small-business optimism sees largest drop in more than year

A worker removes a vinyl record from a press at the Third Man Pressing manufacturing facility in Detroit, Michigan, U.S., on Friday, Feb. 2, 2024. MUST CREDIT: Eilon Paz/Bloomberg
A worker removes a vinyl record from a press at the Third Man Pressing manufacturing facility in Detroit, Michigan, U.S., on Friday, Feb. 2, 2024. MUST CREDIT: Eilon Paz/Bloomberg

U.S. small-business optimism last month suffered the biggest drop in more than a year, due to deteriorating profits and diminishing sales expectations, according to the National Federation of Independent Business.

The group's overall index fell 2 points to 89.9, the sharpest monthly slide since December 2022. The share of owners who expect higher real sales volumes slumped 12%, the most since mid-2022, from a month earlier.

Additionally, a greater share of small-business owners reported lower earnings over the last three months.

"Small-business owners continue to make appropriate business adjustments in response to the ongoing economic challenges they're facing," Bill Dunkelberg, NFIB's chief economist, said in a statement.

"A more positive view of the future economy and economic policy would help stimulate longer term investment spending, but currently, owners' views about the future are not supportive and financing costs are very high," he said.

The share of owners planning to boost employment dropped to the lowest level since May 2020. Thirty-nine percent, the smallest share in three years, had job openings that they were unable to fill, with an overwhelming majority continuing to cite a lack of qualified candidates.

Meanwhile, 15% of the owners reported reducing selling prices, representing the largest share since August 2020.

While inflation is cooling and becoming slightly less of a concern among firms, a significant portion of owners still identified that as the single most important concern in managing their businesses.

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