Optimism is growing among small business owners, but it's hard to call them “optimistic.”
This is according to the National Federation of Independent Business' (NFIB) latest Small Business Optimism Index, released Tuesday (July 9).
The index rose 1% from May to its highest this year at 91.5 last month, but remains below its historical average of 98 for 30 consecutive months.
“The public remains pessimistic about the economy for the rest of the year,” Bill Dunkelberg, the federation's chief economist, said in a news release.
“Increasing compensation costs are leading to higher prices across the board, while small business owners brace for uncertain months with no relief from inflation in sight.”
The report found that inflation remains the biggest issue for small businesses, with 21% citing it as their main problem, down from 22% in May.
Other key findings from the report include that 22% of employers say they plan to increase compensation in the next three months, a four percentage point increase from May.
The number of employers planning to invest in inventory in the next few months fell by a net 2% (seasonally adjusted), up 4 percentage points from May, while 52% of employers said they had made capital investments in the past six months, the lowest level since August 2022.
Additionally, 4% of business owners said their borrowing needs were not being fully met, up 1 percentage point from the previous month and the highest level since August 2022.
This is consistent with a PYMNTS Intelligence survey conducted earlier this year, which found one-third of Main Street business owners said the cost of lending remains a concern this year.
90% of small and medium-sized businesses (SMBs) said they will rely on at least one type of borrowing tool by 2023, while 73% of SMBs are turning to revolving credit products such as credit cards or lines of credit, making this the most popular method of borrowing.
Additional research found that as of the midpoint of last year, only 47% of small businesses with annual revenues of $10 million or less said they had access to business or personal funds.
Meanwhile, established small businesses appear to be the exception to the revenue increases that smaller businesses have seen, at least so far this year: Main Street businesses that have been in business for more than 20 years have seen slower growth rates compared to newer companies.
