Small business optimism continued to decline throughout September, according to the National Federation of Independent Business (NFIB).
The Small Business Optimism Index, a survey used to analyze trends in the experiences of U.S. entrepreneurs, recorded a marginal decline in September, causing the score to rest at 90.8. In comparison, the index’s average score is 98, a number that the NFIB says it has not seen since 2021. Although optimism improved in July, September marks the second consecutive month of declines.
Bill Dunkelberg, chief NFIB economist, attributed the decline in small business optimism to increased uncertainty around the economy’s health. “Sales growth among small businesses has slowed and the bottom line is being squeezed, leaving owners few options beyond raising selling prices for financial relief,” he noted. Some of the most predominant concerns among entrepreneurs are rising inflation and interest rates. Although the Federal Reserve has gradually deescalated its battle against rising consumer prices, the costs of goods and services are still rising at a rate faster than the government’s target 2% rate.
Nevertheless, the NFIB’s report does not signal that small business owners are necessarily pessimistic. In a Bank of America report, women and minority entrepreneurs shared positive forecasts for revenue and hiring growth. Despite the decline in September, the Small Business Optimism Index recorded an overall gain in the third quarter, rising to its highest level since the onset of the COVID pandemic in 2020. One potential explanation for last month’s decline is the (now-delayed) government shutdown. Given that this is a temporary issue, confidence in the economy may be due for an improvement in the upcoming months, but only if some of the concerns affecting entrepreneurs are addressed by Congress. The government should especially consider the issues of inflation and interest rates, as these two factors continue to rank high on the list of small business owner anxieties.
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