Written by Amina Niasse
NEW YORK (Reuters) – Business confidence among U.S. small businesses fell to the lowest level since May 2023 in January as weak labor costs and sales weighed on profits, according to a report released on Tuesday. .
The National Federation of Independent Business' monthly sentiment index was 89.9 in January, down 2 points from 91.9 in December, the largest decline since December 2022. The decline follows a five-month rise in December and marks the 25th consecutive month below the 50-year average of 98.
Labor quality and inflation were both top concerns for business owners in January. Sales conditions have tightened as costs have increased, and the percentage of owners reporting profit growth has fallen to a net negative 30% from a net negative 25% in December, the report said.
“Small business owners continue to make appropriate operational adjustments in response to the continued economic challenges they face,” said Bill Dunkelberg, chief economist at NFIB. “Small business owners' optimism declined in January as inflation remains a major hurdle on Main Street.”
Despite this, the percentage of owners citing inflation as their top concern fell by three points to 20%, the report said. Concerns persist over interest rates and tighter credit conditions for small business borrowers, with the Federal Reserve's campaign to raise rates starting in 2022 aimed at curbing inflation. However, the Fed has signaled that it is done raising rates and is in a position to cut rates later this year.
On a six-month basis, the percentage of owners expecting their business conditions to improve fell by 2 percentage points to -38%. The percentage of owners expecting real sales growth fell by 12 points in January to -16%.
(Reporting by Amina Niasse; Editing by Andrea Ricci)
