U.S. NFIB Small Business Optimism Index (June 2024)

Small Business Optimism Index Improves for Third Consecutive Month in June

• NFIB's Small Business Optimism Index rose 1 point to 91.5 in June, beating market expectations for a modest decline to 90.2.
• Half of the ten subcomponents were unchanged on the month, four improved, and one deteriorated. The improving categories included expectations for the economy to improve (up 5 points to -25%), reporting current inventory levels as 'too low' (up 6 points to -2%), and subsequently, plans to add to inventories (up 4 points to -2%).
• The net share of businesses planning to increase employment was unchanged at 15% in June. The share of firms with unfilled job openings fell 5 points to 37%. Quality of labor concerns declined marginally, with 19% of business owners identifying this as their top business problem, but it continued to come second to inflation concerns which fell slightly to 21% in June.
• The net share of firms currently increasing employee compensation rose by 1 point to 38%, while the net share planning to do so over the next three months rose 4 points to 22%. The share of businesses 'raising' average selling prices increased by 2 points to 27% while the share of those 'planning’ to raise average selling prices fell 2 points to 26%. 

Key Implications

• Small business confidence increased consistently through the second quarter, with expectations for the economy to improve reaching its best reading in three years in June. Although a plurality of small businesses still expects the economy to slow moving forward, they also intend to increase their employment levels and capital expenditures over the coming months. This illustrates expectations on Main Street for slower, but still stable economic growth moving forward.
• Labor market tightness also eased in June, however the share of firms raising wages and average selling prices remained elevated, which could lead to more persistent inflationary pressure. Thursday's CPI inflation report for June will provide more insights into price trends for the month before the Federal Reserve meeting in three weeks.          

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