Rushmore State News

The NFIB Small Business Optimism Index has experienced a decline of 2.5 points in August, landing at 91.2 and negating gains seen in July. This marks the 32nd consecutive month that the index remains below its 50-year average of 98. Accompanying this decline is a rise in the Uncertainty Index, which reached 92, its highest level since October 2020. Inflation is cited as a primary challenge, with 24% of small business owners identifying it as their leading operational issue, a slight decrease from the previous month.

"The mood on Main Street worsened in August, despite last month’s gains," stated NFIB Chief Economist Bill Dunkelberg. He noted that high inflation persists as the main concern for business owners amid declining sales expectations and increasing cost pressures. Dunkelberg added that uncertainty among small business owners continues to grow as their outlook on future business conditions deteriorates.

Speaking on the matter, NFIB State Director Don Larson remarked, "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."

The recent index report highlighted several key statistics. The net negative frequency of positive profit trends reached 37% (seasonally adjusted), marking a seven-point decline from July and representing the lowest figure since March 2010. Owners reporting inflation as the most pressing business problem decreased by one point from the previous month, now at 24%.

Expectations for higher real sales volumes among owners fell by nine points to a net negative 18% (seasonally adjusted), significantly impacting the Optimism Index along with trends in earnings and anticipated business conditions. A net 20% of owners plan to increase compensation in the upcoming three months, a two-point rise from July.

Challenges in the labor market were evident, as reported in NFIB’s monthly jobs report. Around 40% of small business owners experienced unfillable job openings in the current period, representing an increase of two points since July. Furthermore, of the 62% attempting to hire in August, 90% encountered few or no qualified applicants.

Investment in business assets saw 56% of owners making capital outlays over the last six months, which is two points higher than in July. Among those spending, 40% invested in new equipment, 21% in vehicles, and 18% in facility improvements or expansions.

Sales figures indicated a net negative 16% of owners reported higher nominal sales over the last three months. Inventory levels remained constant at a net negative 9%, while a net negative 1% of owners plan inventory investments in the coming months.

Regarding pricing, owners showed a net 20% increase (seasonally adjusted) in raising average selling prices, with inflation as their top issue. Altered pricing strategies were most notable in the finance, retail, construction, and manufacturing sectors. A net 33% reported increasing compensation, unchanged from July, whereas a net 20% plan on raising compensation in the next quarter.

The frequency of reports detailing profit trends has declined to the lowest since March 2010 at a net negative 37% (seasonally adjusted). Among those with reduced profits, reasons included weaker sales and rising material costs; conversely, owners experiencing higher profits attributed it to increased sales volume and seasonal changes.

Credit availability remains a secondary concern for few, with 3% of owners indicating unmet borrowing needs, while 26% found all credit requirements satisfied.

The NFIB Research Center has monitored Small Business Economic Trends since 1973 through quarterly and since 1986 via monthly surveys, with respondents being selected randomly from its membership. The survey informing this report was conducted in August 2024.