Key facts
- U.S. small-business sentiment declined in May, with the Small Business Optimism Index falling to 95.3.
- The share of owners planning to raise prices in the next three months increased to 34%, the highest since July 2022.
- Inflation was cited as the second most important problem for small businesses, after taxes.
- Plans for small businesses to hire new employees fell to 9%, the lowest since May 2020.
- Inflation expectations from a separate New York Fed survey remained stable in May.
U.S. small-business sentiment declined in May, with owners expressing increased concerns about inflation and uncertainty, according to the National Federation of Independent Business (NFIB). The Small Business Optimism Index fell to 95.3, below its long-term average, while the uncertainty index rose, partly due to geopolitical events like the Middle East conflict impacting commodity prices.
Despite the dip in sentiment, a separate New York Federal Reserve survey indicated that public inflation expectations remained largely stable in May. Respondents anticipated 3.5% inflation in one year, down slightly from April, with three- and five-year expectations holding steady. However, the NFIB survey highlighted a significant increase in small businesses planning to raise prices, with 34% intending to do so in the next three months, the highest level since July 2022. About 36% of owners reported already raising prices.
The labor market views among small businesses were also less optimistic. The employment index eased for the third consecutive month, and plans to hire new employees dropped to the lowest level since May 2020. Despite this, worker shortages persist in certain sectors. Inflation was identified as the second most significant challenge for small businesses, following taxes.