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US Small Business Optimism Remains Subdued in September 2024, Uncertainty Rises.

In September 2024, the United States Small Business Optimism Index rose slightly to 91.5 but stayed below the 50-year average for the 33rd consecutive month. Key concerns incl...

In September 2024, the latest United States Small Business Optimism Index report revealed a slight rise in optimism among small business owners, with the index increasing by 0.3 points to 91.5. However, this marks the 33rd consecutive month the index has remained below the 50-year average of 98, signaling ongoing challenges for small businesses. The report highlights critical areas of concern, including persistent labor shortages, a notable decline in capital spending, and rising uncertainty, with the Uncertainty Index hitting a record high of 103. While some businesses still plan to create jobs and invest, inflation, high borrowing costs, and weaker sales weigh heavily on business owners’ outlook for the future.

Read Full Report SBET Sept 2024

Small Business Optimism Remains Subdued in September 2024, Uncertainty Rises

The Small Business Optimism Index for September 2024 increased slightly by 0.3 points to 91.5 but remains below the 50-year average of 98 for the 33rd consecutive month. The last time the index was above average was in December 2021. Alongside this modest increase, the Uncertainty Index surged by 11 points to 103, the highest level on record.

Labor Markets Show Strain

The labor market continues to face challenges, with 34% of small business owners reporting job openings they could not fill—a drop of 6 points from August and the lowest figure since January 2021. Construction, transportation, and manufacturing are experiencing the most significant shortages. Despite this, 15% of owners plan to create new jobs in the next three months, indicating continued hiring intent.

Decline in Capital Spending

Capital spending saw a noticeable decline, with 51% of business owners reporting capital outlays in the last six months, down 5 points from August. Despite the Federal Reserve’s rate cuts, only 19% plan capital expenditures in the coming months, a reflection of ongoing economic uncertainty and high financing costs.

Sales and Inventory Struggles

Sales and inventory levels are under pressure. A net negative 17% of owners reported higher nominal sales, the lowest reading this year. Inventory gains fell, with more owners reducing stock rather than adding, reflecting caution in a volatile economic environment.

Compensation and Earnings

Compensation remained steady, with a net 32% of owners raising wages in September, down slightly from August. Labor quality remains a critical concern, with 17% of owners citing it as their top issue, although this figure fell 4 points from August. Profitability challenges persist, with 37% of owners attributing lower profits to weaker sales.

Inflation and Credit Markets

Inflation remains a primary concern, with 23% of owners naming it their top problem, slightly down from August. Meanwhile, borrowing costs continue to rise, with the average interest rate on short-term loans climbing to 10.1%, the highest since February 2001.

In summary, while optimism remains stable, uncertainty rises, particularly as small business owners face persistent labor challenges, higher financing costs, and inflation pressures. With a crucial election approaching, many owners await more precise signals before making significant investments or hiring decisions.

 

About the Author:

Holly Wade
Holly Wade
Holly Wade is the executive director of the NFIB Research Center, where she has 18 years of experience conducting original research on the small business sector focusing on small business economic conditions, business operations, and public policy issues impacting small firms. She produces NFIB’s monthly Small Business Economic Trends publication, ...
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