The June NFIB Small Business Optimism Index has been released, and while optimism remains high, the uncertainty index increased to its highest level since March 2017. According to NFIB President and CEO Juanita Duggan, "Last month, small business owners curbed spending, sales expectations and profits both fell and the outlook for expansion dampened. When you add difficulty finding qualified workers and harmful state-level laws and regulations, you're left with a volatile mix where uncertainty has increased to levels not seen in more than two years."
Measured in 10 Index Components and benchmarked against the previous month, the three categories that improved are expected credit conditions and access to capital along with balanced inventory levels and plans to increase stock in spite of tariff uncertainty. Small business owner's outlook on the economy remained flat since last month.
What is particularly concerning, however, is of the six categories that declined since May, the three categories with the largest declines represent outlook for future growth, including expectations of sales growth and expansion planning. Also, 26% of the owners surveyed plan capital outlays in the coming months, but the decline since May highlights apprehension with the future being less certain. The biggest challenge small business owners are dealing with has been and continues to be employment-related. The labor market is tight, and finding qualified applicants at rates small businesses can afford and scale into their operations appears to be a perpetual issue.
It would be difficult to determine how predictive these moves can be for the future of the larger economy. However, it is worth considering the impact small businesses have, especially those that supply big business. Downward trends, particularly in growth metrics, over a realistic period could be a signal of challenges ahead.