Small business confidence in the United States rose to an eight-month high in July, as concerns about inflation fell to their lowest level in nearly two years, according to a report released on Tuesday.
The National Organization for Small Business (NFIB) reported that the Small Business Optimism Index rose by nine-tenths of a point to 91.1 last month, reaching its highest level since November 2022. The decline in inflation in July appeared to have a positive effect on small businesses, with only 21% saying that inflation was their biggest concern, the lowest reading since November 2021 and down 13 points from a year earlier.
The continued improvement in confidence appears to be impacting investment in the workforce and capital investment plans. More than half of firms reported plans to invest in capital, and 17% reported plans to increase employment opportunities, both up by 2 percentage points from the previous month.
In addition, small businesses posted their most optimistic view of the near-term economic outlook since August 2021, with the NFIB general business conditions outlook index rising 10 points to -30. Small businesses in the United States have had a negative view of the business climate since December 2020, after former President Donald Trump lost his natural election.
Declining consumer demand has undermined confidence in the ability to benefit from consistent price growth, and the number of firms planning to raise prices fell to a net 27%, the lowest reading since April.
This is news welcomed by the Federal Reserve, whose 525 basis point interest rate hike also appears to be controlling credit demand for small businesses: 62% say they are not interested in getting a loan, up 2 percentage points from June, and 25% report all credit needs they were met, a decrease of 2 percentage points from the previous month.
However, businesses did not significantly report that credit was getting harder to get, with 6% saying their last loan was no harder to get than before.
