Labor Shortage, Inflation Drag Small Business Sentiment to 11-Month Low

Source: National Federation of Independent Business

Small business confidence in the United States plunged to the lowest level in 11 months in January, dragged by staffing concerns and materials inflation.

• The Small Business Optimism Index stood at 97.1 in January, reflecting a 1.8 point decline. This is the lowest level since February 2021.
• The decline was on the back of inflationary concerns, mainly driven by massive stimulus from governments amid the COVID-19 pandemic.
• Labor issues were also recorded during the month, hitting the delivery of goods from manufacturers to markets.
• Half of the small businesses recorded higher compensations for the month, up 2 points from December and the highest in 48 years.
• Over a quarter of the businesses indicated plans to hike compensation in the next three months, with 11% saying labor costs were their top business problem.
• Some 23% of the firms noted issues on labor quality while selling prices increased by 4 points to 61%. This is the highest since the fourth quarter of 1974.