US small business sentiment rises to six-month high in June
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[July 09, 2024] WASHINGTON
(Reuters) - U.S. small-business confidence increased to a six-month high
in June, but inflation worries lingered amid a rise in the share of
owners planning to raise compensation for workers over the next three
months.
The National Federation of Independent Business (NFIB) said on Tuesday
its Small Business Optimism Index climbed 1 point to 91.5 last month,
the highest level since last December.
Nonetheless, June marked the 30th straight month that the index stayed
below the 50-year average of 98 as inflation concerns remained on the
radar and higher borrowing costs weighed on capital investment.
A net 22% of businesses planned to increase compensation in the next
three months, up 4 points from May. That was despite 37% of owners
reporting job openings they could not fill, down 5 points from May.
The NIFB, however, noted that the labor market remained tight in the
construction, transportation, and retail sectors. About 16% of
businesses reported unfilled positions for unskilled labor, an increase
of 2 points from the prior month.
In contrast, the share of owners reporting open vacancies for skilled
workers dropped 6 points to 31%. Job creation plans were unchanged.
The overall labor market is loosening up amid restrictive monetary
policy, with government data last week showing there were 1.22 job
openings for every unemployed person in May. The unemployment rate rose
to a 2-1/2-year high of 4.1% in June.
The share of small businesses raising average selling prices increased 2
points to 27% in June. But the proportion planning price hikes slipped 2
points to 26%.
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A worker fills a cannoli at a bakery at Reading Terminal Market in
Philadelphia, Pennsylvania, U.S. February 19, 2022. REUTERS/Hannah
Beier/File Photo
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"Demand is still too strong to trigger widespread price reductions,"
said Bill Dunkelberg, NFIB chief economist. "Rising labor costs are
keeping pressure on price decisions, but the frequency of
compensation increases is falling as well, a favorable development
for the inflation fight."
Government data on Thursday will likely show consumer prices nudging
up 0.1% in June after being unchanged in May, according to a Reuters
survey of economists. The annual increase in consumer inflation is
forecast to have slowed to 3.1% in June from 3.3% in May.
The Federal Reserve has maintained its benchmark overnight interest
rate in the current 5.25%-5.50% range since last July. The U.S.
central bank raised its policy rate by 525 basis points since 2022
to quell inflation.
Higher borrowing costs are constraining capital expenditure, with
the share of small businesses reporting capital outlays in the last
six months dropping 6 points to 52%, the lowest level since August
2022. The proportion planning capital outlays over the next six
months was unchanged at 23%.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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