Small Business Optimism Rises, But Owners Still Face ‘Unprecedented’ Economic Hardship: NFIB

File photo showing a hardware store in New York, on Oct. 15, 2024.Benjamin Chasteen/The Epoch Times

Small business optimism inched up in October in the run-up to the presidential election, while uncertainty rose to its highest recorded level as owners continued to face “unprecedented” levels of economic adversity, according to the National Federation of Independent Business (NFIB).

The NFIB’s optimism index rose by 2.2 points in October to 93.7, the group announced on Nov. 12. The reading marked the 34th consecutive month below the group’s 50-year average of 98, as low sales, unfilled job openings, and inflation continued to pressure small business owners.

“Although optimism is on the rise on Main Street, small business owners are still facing unprecedented economic adversity,” NFIB chief economist Bill Dunkelberg said in a statement.

A net negative 20 percent of small business owners reported higher nominal sales over the past three months, a drop of three points from September and the lowest figure since July 2020. Also, the frequency of reports on positive profit trends remained at a net negative 33 percent, indicating widespread struggles in maintaining profitability.

Among those reporting declining profits, 39 percent cited weaker sales as the main factor, while 16 percent blamed rising material costs.

Inflation remained a top concern, with 23 percent of owners identifying it as their most significant problem, unchanged from September. Pricing pressures also persisted. A net 21 percent of small business owners reported raising average selling prices in October, while 26 percent plan to hike prices in the coming months. The sectors most affected by price increases include finance, retail, construction, and services.

Uncertainty about future business conditions rocketed to a record high last month, with the NFIB’s uncertainty index rising seven points to 110. However, with the election now over, small business owners are likely to start feeling more confident about the future, Dunkelberg predicted.

“With the election over, small business owners will begin to feel less uncertain about future business conditions,” Dunkelberg said. “Low sales, unfilled jobs openings, and ongoing inflationary pressures continue to challenge our Main Streets, but owners remain hopeful as they head toward the holiday season.”

President-elect Donald Trump’s resounding election victory sent investor optimism soaring, propelling all three of Wall Street’s major indexes to record highs, with the S&P 500 and the Dow Jones recording their best weekly performance in about a year last week. The post-election rally has since taken a breather, however, with stocks pulling back on Nov. 12, as investors turn their attention to inflation data, set to be released later this week.

“Markets can continue to go higher as long as we continue to keep inflation in check and the labor market stays relatively steady,” Kevin Nicholson, Global Fixed Income Chief Investment Officer at Riverfront Investment Groupe said last week. “In addition to that, the consumer is [a] really, really important part of the equation. So as long as the consumer continues to consume, companies will continue to have good earnings and so I think that the market can continue to rally for some time going forward.”

Consumer spending prospects received a boost at the end of last week as the University of Michigan’s Consumer Sentiment Index rose to a seven-month high in early November. The gauge of household expectations for the future reached its most optimistic level in over three years, driven largely by strong gains among Republican respondents.

Despite this upswing in sentiment, long-term inflation expectations edged higher, underscoring lingering doubts about price stability. Short-term inflation expectations for the year ahead dipped slightly to 2.6 percent, while long-term inflation expectations rose to 3.1 percent, signaling a mixed outlook as markets navigate the early days of a Trump presidency.

One snapshot of consumer health came in the form of Home Depot’s third-quarter financial results, which noted a continued pullback in consumer spending—but less severe than in the past. Ted Decker, CEO of Home Depot, cited continued macroeconomic uncertainty, while the company’s third-quarter revenues exceeded forecasts, improving 6.6 percent to $40.2 billion in the quarter.