Small Business Optimism Increases In June, Reflects Brighter Economic Outlook

<p>&nbsp;The NFIB Small Business Optimism Index saw a significant increase, rising by 1.6 points to 91.0 in June.</p><p><br /></p><p>This was the most significant monthly increase since August 2022, indicating a significant improvement in sentiment among small businesses. In addition, small firms show a more positive economic outlook.</p><p><br /></p><p>The percentage of business owners who expect an improvement in the economy over the next six months increased by 10 points to a net -40% in June.</p><p><br /></p><p>Although still low from a historical perspective, this figure has increased from a low of -61% in June 2022.</p><p><br /></p><p>Additionally, the number of business owners who believe that the next three months provide good opportunities for expansion also increased by three points to 6%.</p><p><br /></p><p>When examining the top concerns of small businesses in June, inflation and workforce quality came out as the top issues. However, the responses from the survey show that there is progress in both of these aspects.</p><p><br /></p><p>Small businesses have seen a decline in price increases, with the net percentage of firms reporting a price increase in the past three months falling to 29% in June, down three points from May.</p><p><br /></p><p>This figure is less than half of what was reported a year ago.</p><p><br /></p><p>However, the number of firms expecting future price increases increased slightly to a net 31% but is still well below the peak level reached in May 2022.</p><p><br /></p><p>Although labor supply remains a major concern, small businesses have experienced an increase in labor availability.</p><p><br /></p><p>In June, 42% of firms reported difficulty filling job vacancies, which was the second lowest reading in the past year.</p><p><br /></p><p>However, business owners seem to be cutting back on hiring.</p><p><br /></p><p>A net 15% expect employment to increase over the next three months, down four points from the previous month and in line with the lowest reading since the pandemic recession in March.</p><p><br /></p><p>A combination of increased labor supply and weak labor demand appears to have eased wage pressures.</p><p><br /></p><p>The net percentage of business owners who reported an increase in employee compensation in the past three months fell by five points to 36%, marking the lowest reading since May 2021.</p><p><br /></p><p>Optimism among small businesses appears to be bolstered by the prospect of consumer resilience. While actual sales declined in June, with a net percentage of -10% of business owners reporting an increase in sales compared to -8% in May, the percentage of businesses expecting future sales increases increased to -14%.</p><p><br /></p><p>Credit conditions for small firms are still relatively tight, although there are no signs of abating at the moment.</p><p><br /></p><p>The net percentage of firms facing greater credit resistance in the past three months remained stable at 6% in June. Although slightly higher than the 2021 average, this figure has remained stable over the last three months.</p><p><br /></p><p>Despite higher financing costs, the number of small businesses planning capital expenditures in the near term is increasing. A net 25% of business owners stated their intention to make capital expenditures in the next three to six months. Although unchanged from the previous month, this figure shows a slight increase compared to the first quarter of this year.</p>