Small business sentiment plummets due to labor worries and rising costs -NFIB report shows greatest decline in 13 months

Small Business Sentiment Hits Lowest Point Since 2023, Despite Inflation Concerns Dropping

In a report published on Tuesday, it was revealed that U.S. small business sentiment reached its lowest point since May 2023 in January. The National Federation of Independent Business monthly sentiment index fell to 89.9 from 91.9 in December, marking the largest decrease since December 2022. Despite this, the share of owners citing inflation as their top concern dropped 3 points to 20%.

Small business owners are facing a range of challenges, including labor quality and tight sales conditions. The share of owners reporting profit growth fell to a net negative 30% from a net negative 25% in December, indicating that adjustments are being made to respond to these economic challenges. Looking ahead, the portion of owners expecting better business conditions in the next six months fell 2 points to negative 38%, while the share of owners who expect higher real sales fell 12 points to negative 16% in January.

Despite these challenges, there is some hope for small businesses as the Federal Reserve has signaled that rate hikes are over and it should be in a position to lower rates later this year. This could help ease some of the pressures faced by small business owners and allow them to focus on growth and expansion once again.

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