US small-business sentiment slides to lowest level in more than 11 years

[April 09, 2024]  WASHINGTON (Reuters) - U.S. small-business confidence slipped to the lowest level in more than 11 years in March amid rising concerns about inflation, according to a survey on Tuesday.

A construction worker is silhouetted against the morning sky while working on a project in San Diego, California U.S., March 5, 2024. REUTERS/Mike Blake/File Photo

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index fell 0.9 point to 88.5 last month, the lowest level since December 2012. It was the 27th straight month the index was below the 50-year average of 98.

Twenty-five percent of owners reported inflation was their single most important problem in operating their business, reflecting higher input and labor costs, up 2 points from February. The share of businesses raising average selling prices rose 7 points from the prior month.

That aligns with a pick-up in consumer prices in the first two months of the year. Price increases were prevalent in the finance, retail, construction, wholesale and transportation sectors. There was also an increase in the share of businesses raising compensation even as demand for labor is cooling.

The NFIB reported last week that hiring plans among small businesses in March were the weakest since May 2020.

Nonetheless, small businesses in the transportation, construction and services industries are experiencing an acute shortage of workers, both skilled and unskilled.

The government reported last week that the economy added 303,000 jobs in March, with the unemployment rate falling to 3.8% from 3.9% in February.

It is expected to report on Wednesday that the consumer price index rose 0.3% in March after advancing 0.4% in February, according to a Reuters survey of economists. The CPI is expected to have increased 3.4% year-on-year in March after advancing 3.2% in February.

Inflation remains above the Federal Reserve's 2% target.

The U.S. central bank is expected to start cutting interest rates this year, though the timing is uncertain. The Fed has kept its policy rate in the 5.25%-5.50% range since July. It has raised the benchmark overnight interest rate by 525 basis points since March, 2022.

(Reporting by Lucia Mutikani; Editing by Peter Graff)

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