U.S. small-business optimism ticked up to a five-month high in December, largely reflecting less pessimism around sales, earnings trends and economic expectations.
A National Federation of Independent Business index of sentiment rose 1.3 points last month to 91.9, the highest since July and matching the best reading of 2023, the group said Tuesday. Owners were less downbeat about the outlook for business conditions and only a net 4% expect lower sales in the next three months, the smallest share in nearly two years.
While small businesses are generally still downbeat about the economy, their views seem to be stabilizing rather than getting worse. The Federal Reserve has signaled it’s done raising interest rates as inflation has retreated and the job market has largely remained resilient, reinforcing expectations that the U.S. will avert a recession.
“Small-business owners remain very pessimistic about economic prospects this year,” NFIB Chief Economist Bill Dunkelberg, said in a statement. “Inflation and labor quality have consistently been a tough complication for small business owners, and they are not convinced that it will get better in 2024.”
A net 25% of firms reported higher prices in December compared to three months ago, holding at the lowest level since early 2021. However, that share was more in the range of 10% to 15% in the two years leading up to the pandemic.
Many owners still reported difficulty filling open positions and attracting quality candidates. More firms on net reported recently decreasing headcount for a ninth month, matching the longest streak since 2011.
Credit conditions are improving somewhat, with fewer owners expecting the environment to worsen in the next three months. A net 20% of owners reported paying a higher rate on their most recent loan, the smallest share since July 2022.
This article was provided by Bloomberg News.