Rushmore State News

The NFIB Small Business Optimism Index experienced a decline of 2.5 points in August, reaching 91.2 and undoing the gains made in July. This marks the 32nd consecutive month that the index has remained below the 50-year average of 98. Additionally, the Uncertainty Index increased to 92, its highest level since October 2020. Inflation continues to be a primary concern for small business owners, with 24% identifying it as their main operational issue, a slight decrease from July.

NFIB Chief Economist Bill Dunkelberg commented on the situation: “The mood on Main Street worsened in August, despite last month’s gains. Historically high inflation remains the top issue for owners as sales expectations plummet and cost pressures increase. Uncertainty among small business owners continues to rise as expectations for future business conditions worsen.”

Don Larson, NFIB State Director, expressed his concerns: “The Small Business Optimism Index’s recent drop is deeply concerning. North Dakota’s small business owners are facing significant challenges due to rising inflation and costs, as well as the potential expiration of the small business deduction next year. Now more than ever, we must work together to promote policies that support our small businesses.”

Key findings from the report include a net negative profit trend at -37%, which is seven points worse than July and represents the lowest point since March 2010. The percentage of owners citing inflation as their primary problem decreased slightly by one point from July but remains significant at 24%. The net percentage of owners expecting higher real sales volumes dropped by nine points to -18%.

In terms of employment, a seasonally adjusted 40% of small business owners reported unfilled job openings in August, an increase of two points from July. Among those hiring or attempting to hire (62%), a vast majority (90%) reported difficulty finding qualified applicants.

Capital expenditures were reported by 56% of owners over the past six months—a two-point increase from July—with spending focused primarily on new equipment (40%), vehicles (21%), and facility improvements or expansions (18%). Looking ahead, 24% plan capital outlays within six months.

Sales trends showed that a net negative 16% reported higher nominal sales over three months while inventory gains remained unchanged at -9%. The percentage planning inventory investments fell by three points to -1%.

Price adjustments varied across sectors; finance saw a net increase with prices up for 52%, retail had prices up for 47%, construction had increases for 33%, and manufacturing also saw increases at this same rate.

Compensation plans indicate that a seasonally adjusted net of 20% intend to raise compensation within three months—an uptick from July figures—while labor quality remains an ongoing concern for many.

Profit trends reveal that among those reporting lower profits: weaker sales were blamed by 31%, material costs by 17%, labor costs by13%, and lower selling prices by10%. Conversely, those with higher profits credited sales volumes (45%), seasonal changes (35%), and increased selling prices (10%).

Credit availability appeared satisfactory overall; only three percent noted unmet borrowing needs while four percent identified financing as their top problem—up slightly from July.

Data collection was conducted through surveys initiated in August among randomly selected NFIB members; results are published monthly on each second Tuesday.