The signs in a storefront window read “Going Out of Business” in Charleston, South Carolina, U.S., March 7, 2024. REUTERS/Brian Snyder/FILE PHOTO
In March, small-business confidence in the United States declined to its lowest level in over 11 years, as indicated by a survey conducted by the National Federation of Independent Business (NFIB). The Small Business Optimism Index, released on Tuesday, decreased by 0.9 points to 88.5, marking its lowest point since December 2012. This marks the 27th consecutive month that the index has remained below its 50-year average of 98.
According to the NFIB survey, 25% of business owners cited inflation as their primary concern, representing a 2-point increase from February. This concern is attributed to escalating input and labor costs. Furthermore, the proportion of businesses raising their average selling prices increased by 7 points compared to the previous month.
These findings correspond with the uptick in consumer prices observed during the first two months of the year, particularly evident in sectors such as finance, retail, construction, wholesale, and transportation. Despite a cooling demand for labor, there has been an increase in businesses raising compensation.
The NFIB also reported that hiring plans among small businesses in March were the weakest since May 2020. However, certain industries, including transportation, construction, and services, are grappling with severe shortages of both skilled and unskilled workers.
The government’s latest report revealed that the economy added 303,000 jobs in March, resulting in a decrease in the unemployment rate to 3.8% from February’s 3.9%. On Wednesday, the consumer price index (CPI) for March is expected to show a 0.3% increase, following a 0.4% rise in February. Year-on-year, the CPI is anticipated to have risen by 3.4% in March, up from 3.2% in February, surpassing the Federal Reserve’s 2% target.
Amidst these developments, the Federal Reserve is expected to initiate interest rate cuts this year, although the exact timing remains uncertain. Since March 2022, the Fed has maintained its policy rate within the range of 5.25% to 5.50%, having raised the benchmark overnight interest rate by 525 basis points.
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