Small business confidence rises modestly in April

Small Business Owners Face Numerous Immediate Challenges

The National Federal of Independent Business reported that its Small Business Optimism Index rose by a smaller-than-expected 1.6 points in April to 99.8. While April's increase was smaller than expected, the Small Business Optimism Index remains slightly above its long-run average. The relatively lofty level is deceiving, however, as a large and growing proportion of business owners report relentless supply chain challenges and a growing number are having to adjust their operating plans to deal with rapidly rising input costs and a persistent shortage of workers or job applicants.

Small Business Optimism Rises in April

The National Federal of Independent Business reported that Small Business Optimism rose by a smaller-than-expected 1.6 points in April to 99.8. Even with the smaller-than-expected rise, Small Business Optimism remains relatively high and is nearly two points above its long-run average. Small Business Optimism hit an all-time high of 108.8 in August 2018.

Eight of the 10 components improved in April, while two declined. Business owners' assessment of earnings over the past three months rose eight points to negative seven. The improvement reflects an increase in sales. The net proportion of firms reporting higher sales over the past three months rose nine points in April to 3% and expectations for sales over the next three months rose one point to a net 1%. While both series are moving in the right direction, both the assessment of current sales and expectations for future sales remain relatively low. By contrast, compensation costs not only continue to trend higher but have reached levels more typically associated with the latter stages of the business cycle. The net proportion of business owners boosting compensation over the past three months rose three points to 31%, while the net proportion of firms planning to boost compensation over the next three months also rose three points to 20%.

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