(Reuters) – U.S. small business confidence fell to a six-month low in December, according to a survey on Tuesday, which also showed that inflation and labor shortages remained big concerns for business owners.
The National Federation of Independent Business (NFIB) said its small business optimism index fell 2.1 points last month to 89.8 – the lowest since June – as the share of owners expecting better business conditions in the next six months fell.
It was the 12th straight month that the index was below the 49-year average of 98. The net share of owners who expect better business conditions in the next six months fell to -51% last month from -43% in November. It was -61% as recently as June.
Thirty-two percent of owners reported inflation as their top concern, unchanged from November and down 5 points from July’s reading, which was the highest since the fourth quarter of 1979. Networked, about 43% of owners reported an increase in average sales prices, lower by 8 points compared to November and the lowest since May 2021.
Government data due on Thursday should show consumer prices in December were unchanged from the previous month, with the annual rise in inflation likely to be the slowest since October 2021, according to a Reuters poll of economists.
Although price pressures have shown signs of easing as 2022 approaches, Federal Reserve officials have not yet signaled that they are confident that the slowdown in inflation is anywhere near enough to allow them to stop raising interest rates in the near term.
The Fed, in its most aggressive rate hike since the 1980s, raised its benchmark rate last year from near zero in March to a range of 4.25% to 4.5% last month. The central bank looks set to raise it by another quarter of a percentage point at its Jan. 31-Feb. 1, aiming to push it above 5% before considering a break.
A tight labor market remains a problem for the Fed and small businesses.
Forty-one percent of owners reported hard-to-fill positions, down 3 points from November. Difficulties in filling job openings were most pronounced in the transportation, manufacturing and construction industries, NFIB said.
“In general, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” said William Dunkelberg, NFIB chief economist. “The owners are dealing with several economic uncertainties and ongoing inflation and are continuing to make business and operational changes to compensate.”
(Reporting by Dan Burns; Editing by Andrea Ricci)