U.S. small-business confidence increased to a six-month high in June, but inflation worries remained as more business owners reported plans to raise compensation for workers over the next three months.
On Tuesday, July 9, The National Federation of Independent Business (NFIB) said its Small Business Optimism Index climbed 1 point to 91.5 last month, the highest level since last December.
However, June 2024 marked the 30th consecutive month that the index stayed below the 50-year average of 98 points. This was also because inflation concerns remained on the radar and higher borrowing costs weighed on capital investment.
A net 22 percent of businesses planned to increase compensation in the next three months, up 4 points from May.
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The NIFB, however, noted that the labor market remained tight in the construction, transportation, and retail sectors.
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About 16 percent of businesses reported a number of positions for unskilled labor that they could not fill, an increase of 2 points from the prior month.
The number of owners reporting open vacancies for skilled workers dropped 6 points to 31 percent.
Government data indicated there were 1.22 job openings for every unemployed person in May of this year.
The unemployment rate is growing, however, and rose to 4.1 percent in June.
“Rising labor costs are keeping pressure on price decisions, but the frequency of compensation increases is falling as well, a favorable development for the inflation fight,” said Bill Dunkelberg, NFIB chief economist.
The annual increase in consumer inflation is forecast to have slowed to 3.1 percent in June from 3.3 percent of last May.
The Federal Reserve has maintained its benchmark overnight interest rate in the current 5.25 percent — 5.50 percent range since last July. The U.S. central bank raised its policy rate by 525 basis points from 2022 to quell inflation.
The share of small businesses reporting capital outlays (that is, expenditures to add or improve assets) in the last six months dropped to 52 percent, 6 points lower, to the lowest since August 2022.
The proportion of planned capital outlays over the next six months was unchanged at 23 percent.
Reuters contributed to this report.
