Small business optimism up slightly in May

Wells Fargo Research Team Wells Fargo

Summary

Uncertainty abounds

Uncertainty surrounding expectations for economic growth and interest rates appears to be weighing on small businesses. The NFIB Small Business Optimism Index posted another modest gain in May; yet at 90.5, the index remains far below its 50-year average of 98. The primary stand out was a jump in the uncertainty index to its highest point since November 2020. As markets bet on when the Fed will ultimately cut rates, high financing costs are steadily chipping away at business sentiment. Sales, earnings and capital outlays also remained muted. Inflation is still the top challenge facing small businesses as the last mile back to 2% proves to be more difficult than previously anticipated. That said, compensation pressures do not appear to be a significant threat to reigniting inflation at the moment.

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Wells Fargo Research Team

Wells Fargo

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