Small business sentiment in the U.S. strengthened to a two-and-a-half-year high in July though inflation remained the top concern for businesses, the monthly survey results from the National Federation of Independent Business (NFIB) showed Tuesday.
The NFIB Small Business Optimism Index rose for the fourth month in a row in July, up 2.2 points to 93.7 from 91.5 in June. Economists had expected the reading to remain unchanged.
The latest reading was the highest since February 2022, the NFIB said.
Despite this increase in optimism, the road ahead remains tough for the nations small business owners, NFIB Chief Economist Bill Dunkelberg said.
Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line.
The headline reading of the NFIB survey was below the 50-year average of 98 for the 31st consecutive month.
Small business owners are heading towards unpredictable months ahead, not knowing how future economic conditions or government policies will impact them, Dunkelberg added.
The share of surveyed small businesses reporting inflation as their main concern was 25 percent, up four points from June.
A net 33 percent reported raising compensation in July, which was five points down from June and the lowest reading since April 2021.
The NFIB also showed that 38 percent of small businesses reported inability to fill job openings in July, up one point from June.
The survey showed Twenty-two percent of businesses raised average selling prices in July, down five points from June. Further, the share of those planning price hikes fell two points to 24 percent, the lowest reading since April 2023.
Pessimism regarding sales growth ebbed somewhat in July with the share of businesses expecting higher sales volumes rising by four points to negative 9 percent, the highest reading thus far this year.
Plans for inventory investment among small business owners turned positive for the first time since October 2022 with a net 2 percent of firms planning outlay in the coming months.