US small business sentiment up in May, but looming election clouds outlook
US SMALL-BUSINESS confidence and hiring plans increased in May to their highest levels of the year, but the looming presidential election also drove uncertainty to nearly a four-year high, a survey showed on Tuesday (Jun 11).
The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose eight-tenths of a point to 90.5 last month, the second consecutive month it has risen after slumping in March to the lowest level since December 2012.
Despite the gain, it was the 29th straight month the index was below the 50-year average of 98. The NFIB’s Uncertainty Index rose nine points to 85, the highest reading since November 2020, the month the last US presidential election took place.
Twenty-two per cent of owners reported that inflation was their single most important problem in operating their business, unchanged from April. The share of businesses planning price hikes increased two points to 28 per cent.
The net per cent of owners raising average selling prices was 25 per cent, also unchanged from April. The Federal Reserve is keenly monitoring the pace of price increases as it tries to return inflation to its 2 per cent target.
There were some indications that small business owners may be beginning to pull back on raising wages. A net 37 per cent of owners reported increasing compensation, down one point from 38 per cent in April, while 18 per cent planned to boost compensation over the next three months, down three points and the lowest reading since March 2021.
SEE ALSO
Small businesses have increasingly felt pressured in the face of persistent inflation and high borrowing costs. The US central bank on Wednesday is expected to leave its benchmark overnight interest rate unchanged in the current 5.25 to 5.5 per cent range, where it has been since last July. The Fed has raised its policy rate by 525 basis points since March 2022 in order to quash elevated inflation.
“For 29 consecutive months, small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years,” said Bill Dunkelberg, NFIB’s chief economist, as inflation once again topped the list of small business owners’ concerns.
Inflation remains sticky at elevated levels and renewed evidence that the job market continues to add workers at a solid clip has caused financial markets to reduce bets to about even odds that the Fed will start its easing cycle in September. REUTERS
Share with us your feedback on BT's products and services
