U.S. small business sentiment fell to a more than 10-year low

WASHINGTON, May 9 (Reuters) – U.S. small business confidence fell to a more than 10-year low in April on worries about the near-term economic outlook and persistent labor shortages, but there were few signs that businesses were struggling to access credit.

The National Federation of Independent Business (NFIB) reported Tuesday that its small business optimism index fell 1.1 points to 89.0 last month, the lowest level since January 2013. It was the 16th straight month , in which the index remains below the average value for 49 years since 98 .

Higher interest rates linked to the Federal Reserve’s battle to tame inflation, combined with tighter credit conditions following recent stress in financial markets, are fueling fears of a recession this year. The fight to raise the federal government’s borrowing ceiling is also helping cloud the economy.

Although the survey hinted at an economic slowdown, economists cautioned against relying too much on the drop in sentiment.

“The decline is broadly consistent with the weakness in consumer sentiment seen over the past year,” said Michael Pearce, chief U.S. economist at Oxford Economics in New York.

“However, as we’ve argued before, sentiment measures are often a poor guide to what’s likely to happen in the economy because they tell us more about how business owners feel than what they’re doing.”

The share of owners who expect better business conditions in the next six months fell two points to a net negative 49%. A net negative 19% expected higher inflation-adjusted sales, down four points from March.

Thirty percent report that all of their credit needs are met, up one point from the previous month. Fifty-nine percent said they were not interested in a loan, unchanged from March. A net 6% reported their most recent loan was more difficult to obtain than previous attempts, down three points, while 4% reported funding was their top business problem, up one point from March.

“Although owners are increasingly pessimistic, the April report should help allay concerns that credit is becoming completely out of reach for small businesses,” said Charlie Dougherty, senior economist at Wells Fargo in New York.


A Fed survey of bank loan officers released Monday showed credit conditions for businesses and households continued to tighten in the first months of the year, but that appeared to be the result of the U.S. central bank’s aggressive rate hikes rather than a sharp a credit crunch that some feared after the March collapse of Silicon Valley Bank and Signature Bank.

Although the Fed has signaled it may halt its fastest monetary tightening campaign since the 1980s, the economy has yet to feel the full impact of the cumulative 500 basis point rate hikes since March 2022

Forty-five percent of owners reported jobs they could not fill, up 2 points from March. Vacancies are concentrated in construction and transport. Thirty-seven percent of owners had vacancies for skilled workers, up three points from March.

The government reported last week that there were 1.6 jobs for every unemployed person in March.

The share of small business owners who reported that inflation was their single most important concern fell one point to 23% and was 14 points below a peak last July, the highest reading since the fourth quarter of 1979

About 33% of owners reported an increase in average sales prices, down 4 points. Government data on Wednesday is expected to show that consumer prices rose strongly in April, but spending on non-housing services is expected to have risen modestly.

Reporting by Lucia Muticani; Editing by Paul Simao

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