In a report published on Tuesday, it was found 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.
Despite these challenges, the share of owners citing inflation as their top concern dropped 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.
The portion of owners expecting better business conditions in the next six months fell 2 points to negative 38%. Additionally, the share of owners who expect higher real sales fell 12 points to negative 16% in January. These statistics paint a sobering picture of the challenges faced by small business owners.
Labor quality and sales conditions were the top concerns for business owners in January. Sales conditions have tightened, with the share of owners reporting profit growth falling to a net negative 30% from a net negative 25% in December. As a result, small business owners are making adjustments to respond to the economic challenges they are facing.