U.S. small-business confidence hit a six-month high in June, though inflation jitters still linger as more owners plan to raise worker compensation soon.
The National Federation of Independent Business (NFIB) revealed its Small Business Optimism Index rose by 1 point to 91.5, the highest since December.
Yet, this marked the 30th consecutive month the index stayed below the 50-year average of 98. Inflation and higher borrowing costs continue to dampen capital investment.
A net 22% of businesses aim to hike compensation in the next three months, a 4-point increase from May, despite 37% of owners reporting unfilled job openings—a 5-point drop from the previous month.
The NFIB noted tight labor markets particularly in construction, transportation, and retail. Unfilled positions for unskilled labor rose 2 points to 16%.
Conversely, vacancies for skilled workers fell by 6 points to 31%, with job creation plans unchanged.
The broader labor market is easing due to restrictive monetary policies, shown by government data indicating 1.22 job openings per unemployed person in May and a 2.5-year high unemployment rate of 4.1% in June.
The percentage of small businesses raising average selling prices rose 2 points to 27%, though those planning price hikes slipped 2 points to 26%.
“Demand remains too strong to trigger widespread price reductions,” said Bill Dunkelberg, NFIB’s chief economist. “Rising labor costs pressure price decisions, but fewer compensation increases is a positive sign for fighting inflation.”
Thursday’s government data is expected to show a 0.1% rise in consumer prices for June, following no change in May, with annual consumer inflation projected to slow to 3.1% from 3.3%.
The Federal Reserve has kept its benchmark interest rate in the 5.25%-5.50% range since last July, raising it by 525 basis points since 2022 to combat inflation.
Higher borrowing costs are curbing capital expenditure, with small businesses reporting capital outlays in the past six months dropping 6 points to 52%, the lowest since August 2022.
Plans for capital outlays in the next six months remained steady at 23%.
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