Buckeye Reporter

The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index increased by 1.7 points in July, reaching 100.3. This figure is slightly above the long-term average of 98 for the past 52 years. The rise in optimism was mainly due to more business owners reporting improved conditions and seeing it as a good time to expand their businesses.

Despite this increase in optimism, the NFIB Uncertainty Index also rose by eight points from June to reach 97. Labor quality remained a major concern for small business owners, with 21% identifying it as their most significant problem, an increase of five points from the previous month.

Cameron Garczyk, Assistant State Director for NFIB Ohio, commented on the situation for local businesses: “Ohio’s small businesses are feeling more optimistic following Congress making the Small Business Deduction permanent and providing Main Street with lasting tax relief. While hiring remains a significant challenge for owners, small businesses report better business conditions.”

The survey found that overall business health showed signs of improvement in July. Thirteen percent of respondents rated their business health as excellent, up five points from June, while 52% rated it as good, up three points. The proportion reporting fair or poor health decreased by four and three points respectively.

However, some challenges persisted. The percentage of owners citing poor sales as their top issue rose to 11%, marking the highest level since February 2021. Expectations for better business conditions saw a notable increase, with a net 36% anticipating improvements—14 points higher than in June.

In terms of expansion plans, 16% reported that it was a good time to expand their operations, up five points from June. Inflation concerns remained steady at 11%, unchanged from June and still at its lowest level since September 2021.

Sales expectations were mixed; the net percentage expecting higher real sales volumes dropped one point to a net 6%. Planned capital outlays edged up one point to 22%, though this remains below the historical average of 29%.

According to NFIB’s monthly jobs report, job openings remain high but have declined somewhat: “a seasonally adjusted 33% of all small business owners reported job openings they could not fill in July, down three points from June and the lowest level since December 2020, though still well above its monthly historical average of 25%. Of the 57% of owners hiring or trying to hire in June, 84% reported few or no qualified applicants for the positions they were trying to fill.” A net adjusted figure shows that “a seasonally adjusted net 14% of owners plan to create new jobs in the next three months,” which is up one point from June.

Labor costs were less frequently cited as a top problem compared to previous months (down one point to nine percent). Reports on compensation indicate that fewer owners raised pay compared with June (down six points), and fewer plan increases over the next quarter (down two points).

Capital investment activity increased slightly: “Fifty-five percent of small business owners reported capital outlays in the last six months,” which is up five points from June’s low point.

Among those investing recently, most spent on new equipment (38%), vehicles (23%), or facility improvements/expansions (15%). Other expenditures included fixtures/furniture (12%) and property acquisition (5%).

On sales performance over the prior three months, more businesses experienced lower nominal sales than higher ones—a net negative nine percent result—while inventory gains held steady at negative eight percent.

Price-setting activity suggests continued inflationary pressures; a net adjusted figure shows “a net 28% plan to increase prices,” although this is four points lower than last month’s reading.

Profit trends remained challenging overall; among those with declining profits, causes included weaker sales (34%), rising material costs (13%), labor costs (11%), and product/service price changes (9%). Among those seeing profit growth, key factors were stronger sales volumes and seasonal changes.

Financing issues appeared relatively stable: Four percent cited financing and interest rates as their main concern—a slight uptick—and borrowing rates were largely unchanged from recent months.

Taxes continue to be another significant issue for small firms: Seventeen percent named taxes as their single biggest problem—the second-highest ranking concern—while government regulation fell slightly as an issue compared with last month.

The data comes from NFIB's ongoing surveys conducted among randomly selected members across Ohio and nationally since quarterly tracking began in late-1973 and monthly tracking started in 1986.