NFIB Optimism Index Falls as Inflation Persists

Small business owner optimism about the future and better business conditions is at a 48-year low, according to the latest data from the NFIB. The NFIB Optimism Index fell 0.1 points in May to 93.1, marking the fifth consecutive month below the 48-year average of 98.

The percentage of business owners expecting better business conditions over the next six months decreased four points to a net negative 54 percent, the lowest level recorded in the survey’s 48 years. Expectations for better business conditions have dropped every month since January. 

Inflation was the single most important problem in operating a business, according to 28 percent of owners. That was a four-point decline from April. The net percent of owners raising average selling prices increased two points to a net 72 percent (seasonally adjusted), back to the highest reading in the 48-year-history of the survey last reached in March and 32 points higher than May 2021.

“Inflation continues to outpace compensation which has reduced real incomes across the nation,” said NFIB Chief Economist Bill Dunkelberg. “Small business owners remain very pessimistic about the second half of the year as supply chain disruptions, inflation, and the labor shortage are not easing.”

Other key findings include:

• Fifty-one percent of owners reported job openings that could not be filled, up four points from April.
• The net percent of owners who expect real sales to be higher decreased three points from April to a net negative 15 percent.
• A net 46% (seasonally adjusted) of owners reported raising compensation, down three points from April with a net 25% planning to raise compensation in the next three months, down two points from April but historically high.
• Thirty-nine percent of owners report that supply chain disruptions have had a significant impact on their business, up three points. Another 31% report a moderate impact and 22% report a mild impact. Only 8% of owners report no impact from the recent supply chain disruptions.