U.S. Small-Business Sentiment Declines Slightly as Uncertainty Persists

By Ed Frankl

Main Street business owners were less optimistic last month, as enduring inflationary pressures and labor shortages add to growing uncertainty about the economy.

The National Federation of Independent Business said Tuesday that its optimism index, a gauge of sentiment among small firms, fell 2.0 points in September to 98.8.

That takes it close to the 98-point level that marks the index's long-term average. Economists polled by The Wall Street Journal ahead of the release had expected the level to hold at 100.8.

"While most owners evaluate their own business as currently healthy, they are having to manage rising inflationary pressures, slower sales expectations, and ongoing labor-market challenges," said NFIB Chief Economist Bill Dunkelberg.

Supply-chain and inflation issues stood out as a key problem, the report said. Around 64% of small business owners reported that supply-chain disruptions were affecting their business to some degree, while a seasonally adjusted net 31% of small-business owners plan to increase prices over the next three months, up five points from August, NFIB said.

Meanwhile, the report's uncertainty index rose seven points in August to 100, the fourth-highest reading in more than 51 years. An increase in owners uncertain about their outlook for expansion contributed most to the rise, NFIB added.

"Although uncertainty is high, small business owners remain resilient as they seek to better understand how policy changes will impact their operations," Dunkelberg added.

The impact of the government shutdown will show up in the October survey, NFIB said.

While hiring plans are at the highest level since January, a seasonally adjusted 32% of owners reported job openings they couldn't fill. Labor quality, alongside taxes, were the top single most-important problem for firms.

On a brighter note, earnings changes--measuring owners reporter higher profits--rose to its highest level since December 2021, NFIB said.

Write to Ed Frankl at edward.frankl@wsj.com