In a report released 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. This keeps the index below its 50-year average of 98 for a 25th consecutive month.
The labor quality and inflation were the top concerns for business owners in January. Despite these challenges, the share of owners citing inflation as their top concern dropped by 3 points to 20%. This coincides with the Federal Reserve’s rate hike campaign in 2022 to curb inflation, though the Fed has since signaled that rate hikes are over and it should be in a position to lower rates later this year.
Small business owners have been making adjustments to respond to the economic challenges they are facing, such as tightening sales conditions, with a net negative profit growth of 30% from a net negative 25% in December. Looking ahead, the portion of owners expecting better business conditions in the next six months fell by two points to negative 38%. Additionally, the share of owners who expect higher real sales also decreased by twelve points to negative sixteen percent in January. These statistics paint a sobering picture of the challenges faced by small business owners as they navigate through tough times.