US small business outlook weakens amid mounting inflation fears

U.S. small-business sentiment fell in May and the share of owners planning to raise prices over the ‌next three months increased to the highest level in nearly four years, suggesting inflation could remain elevated for a while.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index slipped 0.6 to 95.3 last month, falling further below its 52-year average of 98.0.

The ​survey's uncertainty index rose three points to 91. It is running well above its historical average of 68.

The NFIB survey showed the share of small businesses planning to increase prices over the next three ​months jumped seven points to 34%, the highest reading since July 2022.

About 36% of owners reported raising prices, the highest since March 2023, ‌and ⁠up six points from April.

The actual price increases were "well above the historical average of net 13%," the NFIB said. Inflation ranked as the second most important problem facing small businesses after taxes.

Though the Labour Department's closely watched employment report last Friday showed the economy posting three straight months of strong job growth and the unemployment rate holding at 4.3% for the ​third consecutive month in May, ​small business owners were less ⁠enthusiastic about the labour market.

The survey's employment index eased to 100.3 last month from 100.4 in April, declining for the third month in a row.

The share of owners planning to ​create new jobs in the next three months dropped four points to 9%, the lowest ​level since May ⁠2020. The NFIB noted that "plans to hire are now below the historical average of a net 11%."

While the share of owners reporting job openings they could not fill declined five points to 29%, the lowest level since May 2020, worker shortages remained an issue ⁠in some ​industries, including wholesale trade and agriculture.

Some wholesalers in Ohio reported they "have applicants not ​show up for interviews and others apply, interview, accept, and not show up for work."

Some in the agricultural sector in Michigan said "labour is in short supply ​for all levels." An immigration crackdown could be behind the shortage of agricultural workers.

-Reuters