The latest NFIB Small Business Optimism Index highlights the impact rising costs have on Michigan’s small and independent businesses, says Amanda Fisher, state director of NFIB Michigan in Lansing.
“Michigan small business owners are all too familiar with the ongoing cost pressures facing their businesses,” says Fisher. “The Michigan Supreme Court’s recent decision on paid sick leave and minimum wage will only exacerbate these pressures on Main Street. We are hopeful that Michigan’s elected officials will take action soon to help small businesses across the state.”
The NFIB Small Business Optimism Index rose 2.2 points in July to 93.7, the highest reading since February 2022. However, this is the 31st consecutive month below the 50-year average of 98.
Inflation remains the top issue among small business owners, with 25 percent reporting it as their single most important problem in operating their business, up four points from June.
“Despite this increase in optimism, the road ahead remains tough for the nation’s small business owners,” says Bill Dunkelberg, chief economist of NFIB. “Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line. Owners are heading towards unpredictable months ahead, not knowing how future economic conditions or government policies will impact them.”
Key findings include:
- Seasonally adjusted, a net 33 percent reported raising compensation in July, down five points from June and the lowest reading since April 2021.
- A net 2 percent (seasonally adjusted) of owners plan inventory investment in the coming months, up four points from June. The last time inventory investment plans were positive was in October 2022.
- The net percent of owners expecting higher real sales volumes rose four points in July to a net negative 9 percent (seasonally adjusted), the highest reading of this year.
- The net percent of owners raising average selling prices fell five points from June to a seasonally adjusted net 22 percent.
- Seasonally adjusted, a net 24 percent plan price hikes in July (down two points). This is the lowest reading since April 2023.
- Thirty-eight percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up one point from June.
As reported in NFIB’s monthly jobs report, a seasonally adjusted 38 percent of all small business owners reported job openings they could not fill in their current period, up one point from June. Of the 57 percent of owners hiring or trying to hire in July, 86 percent reported few or no qualified applicants for the positions they were trying to fill.
Fifty-four percent of owners reported capital outlays in the last six months, up two points from June. Of those making expenditures, 36 percent reported spending on new equipment, 22 percent acquired vehicles, and 15 percent improved or expanded facilities. Ten percent spent money on new fixtures and furniture and 7 percent acquired new buildings or land for expansion. Twenty-three percent (seasonally adjusted) plan capital outlays in the next six months, unchanged for the third consecutive month.
A net negative 16 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months. The net percent of owners expecting higher real sales volumes rose four points to a net negative 9 percent (seasonally adjusted), the highest reading of this year.
The net percent of owners reporting inventory gains fell six points to a net negative 9 percent, the lowest since August 2020. Not seasonally adjusted, 11 percent reported increases in stocks and 17 percent reported reductions.
A net negative 4 percent (seasonally adjusted) of owners viewed current inventory stocks as “too low” in July, down two points from June. A net 2 percent (seasonally adjusted) of owners plan inventory investment in the coming months, up four points from June. The last time this was positive was in October 2022.
The net percent of owners raising average selling prices fell five points from June to a net 22 percent seasonally adjusted. Twenty-five percent of owners reported that inflation was their single most important problem in operating their business. Unadjusted, 13 percent reported lower average selling prices and 36 percent reported higher average prices.
Price hikes were the most frequent in the finance (57 percent higher, 6 percent lower), wholesale (47 percent higher, 9 percent lower), retail (40 percent higher, 14 percent lower), and construction (38 percent higher, 7 percent lower) sectors. Seasonally adjusted, a net 24 percent plan price hikes in July. This is the lowest reading since April 2023.
Seasonally adjusted, a net 33 percent reported raising compensation, down five points from June and the lowest reading since April 2021. A seasonally adjusted net 18 percent plan to raise compensation in the next three months, down four points from June. Nine percent of owners cited labor costs as their top business problem, down two points from June and only four points below the highest reading of 13 percent reached in December 2021. Nineteen percent said that labor quality was their top business problem, remaining behind inflation as the number one issue.
The frequency of reports of positive profit trends was a net negative 30 percent (seasonally adjusted), one point worse than June. Among owners reporting lower profits, 33 percent blamed weaker sales, 17 percent blamed the rise in the cost of materials, 11 percent cited labor costs, and 10 percent cited lower selling prices. For owners reporting higher profits, 45 percent credited sales volumes, 31 percent cited usual seasonal change, and 11 percent cited higher selling prices.
Two percent of owners reported that all their borrowing needs were not satisfied. Twenty-five percent reported all credit needs met and 62 percent said they were not interested in a loan. A net 6 percent reported their last loan was harder to get than in previous attempts.
Three percent of owners reported that financing was their top business problem in July, down one point from June.
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in July 2024.
Since 1943, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is nonprofit, nonpartisan, and member driven. The organization is exclusively dedicated to small and independent businesses.
For more information, visit nfib.com/.
