Caused By Economic Uncertainty and Worker Shortages

In April, the National Federation of Independent Business (NFIB) reported that small business confidence in the US declined to the lowest level in more than a decade. The drop in confidence was attributed to concerns about the near-term economic outlook and persistent worker shortages.

  • Last month, the Small Business Optimism Index fell 1.1 points to 89.0, marking the 16th consecutive month that the index has remained below the 49-year average of 98
  • The decline was largely caused by higher interest rates, which were tied to the Federal Reserve's efforts to control inflation, as well as tighter credit conditions following recent financial market stress
  • The ongoing fight over raising the federal government's borrowing cap has also contributed to economic uncertainty

Although the survey results hinted at an economic slowdown, economists have cautioned against over-interpreting the drop in sentiment. Michael Pearce, lead US economist at Oxford Economics in New York, noted that the decline was consistent with the weakness in consumer sentiment observed over the past year.

Some Cause For Optimism

According to recent statistics from the U.S. Chamber of Commerce, small business owners are still relatively optimistic about their survival rates despite inflation's negative impact on their profitability. However, economic slowdown or recession remains a major concern for 85% of small business owners.

  • Inflation is the top concern among small business owners, with 57% of respondents indicating so
  • This concern is followed by recession worries (29%), economic uncertainty (29%), gas prices (26%), high taxes (22%), rising interest rates (21%), and supply chain challenges (20%)
  • Small businesses are feeling the impact of inflation, with 55% of respondents reporting that their revenues are not keeping up with inflation
  • Worker shortages are also hampering small businesses' operating capacity, with 55% of respondents reporting difficulties in finding workers
  • On a positive note, 43% of small businesses reported an increase in revenue in 2023, and 42% reported an increase in profitability

Looking ahead, 45% of small business owners plan on maintaining their current employee count over the next six months, while 35% plan on adding employees, and 15% plan on decreasing staff.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. Please note that the writer of this article is not registered as a financial advisor.

Credits

Photo by Ant Rozetsky on Unsplash.