LIVE MARKETS-Small business confidence ticks lower, NFIB survey response rate plunges

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SMALL BUSINESS CONFIDENCE TICKS LOWER, NFIB SURVEY RESPONSE RATE PLUNGES

The mood among small business owners in the U.S. ticked a bit lower in June, logging the fourth monthly decline this year, according to the National Federation of Independent Business (NFIB). But the number of businesses participating in the survey appears to be drying up.

NFIB's Optimism index USOPIN=ECI gave up a scant 0.2 points to land at 98.8, remaining above its 51-year average of 98 amid easing uncertainties related to President Trump's erratic policies.

The uncertainty index shed 5 points.

"Small business optimism remained steady in June while uncertainty fell,” writes Bill Dunkelberg, NFIB's chief economist. “Taxes remain the top issue on Main Street, but many others are still concerned about labor quality and high labor costs."

Digging deeper, forward expectations regarding business conditions and sales weakened, those reporting excess inventories fell, and survey participants who reported capital outlays over the last six months slid six percentage points to the lowest since August 2020.

"The data on overall health of respondents’ business showed substantial deterioration, with declines in the percentages reporting their business was in excellent or good health," the press release says.

Even so, as outpointed by Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, only 382 companies participated in last month's survey, the lowest number since 2006. That's a monthly drop of 21.2% and 25.7% fewer respondents than June 2024.

"The plunging response rate for the NFIB suggests a high likelihood that the survey is understating the current pressures on small businesses," Allen says. "It seems quite likely that many small businesses under intense pressure from the tariffs have stopped responding."

Taxes were identified as the "most important problem," as Trump's "big beautiful" tax bill stumbled along toward passage, beating out poor labor quality and inflation for the second straight month.

Even so, despite easing inflation fears, 32% said they plan to hike prices, the highest reading since March 2024. The percentage of business owners who reported raising average selling prices rose 4 percentage points to 29%.

The graphic below shows intentions to raise prices are higher than they've been in over a year, despite the fact that inflation worries (and inflation itself) have been steadily on the wane.

It's worth noting that the NFIB is a politically active membership organization whose PAC skews heavily Republican, according to the Center for Responsive Politics/opensecrets.org.

(Stephen Culp)

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