Peace Garden News

The NFIB Small Business Optimism Index increased by 0.5 points in August, reaching 100.8, which is nearly three points above its long-term average. Of the ten components that make up the index, four showed improvement, four declined, and two remained unchanged. The largest contributor to the rise was an increase in business owners expecting higher real sales.

The Uncertainty Index dropped by four points to 93 but stayed above its historical average due to decreased uncertainty about financing and planned capital expenditures.

“Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” said NFIB Chief Economist Bill Dunkelberg. “While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”

Don Larson, NFIB North Dakota State Director, commented on the state’s small businesses: “North Dakota small businesses are responsible for over half of the state’s employment. Efforts by Congress and the White House to make the small business tax deduction permanent has resulted in increased capital expenditures and expansion plans among small businesses.”

Survey results from August indicate a modest improvement in how owners rate their business health. Fourteen percent described their business as excellent (up one point), while 54% rated it as good (up two points). Twenty-seven percent considered their business fair (down four points), and 4% reported poor conditions.

Labor quality continued to be identified as the most significant challenge for small businesses, with 21% of owners naming it as their primary concern—unchanged from July. The percentage of owners reporting job openings they could not fill was 32%, a decrease of one point from July and marking the lowest level since July 2020.

Expectations for higher real sales volumes rose six points from July to a net 12%. This factor contributed most significantly to the overall optimism increase. Inventory levels were also viewed more positively; a net zero percent saw stocks as too low, up three points from July.

Price increases slowed during August, with only a net 21% of owners raising average selling prices—the lowest reading this year. Reports of positive profit trends improved by three points but remained negative at net -19%. This was still the best result since March 2023.

Short-term borrowing costs eased slightly; the average rate paid on short maturity loans fell to 8.1%, down by 0.6 points compared to July and representing the lowest rate since May 2023. Regular borrowing activity among owners dropped by two points to 23%, last seen below this level in November 2021.

Job market difficulties persisted across sectors such as construction, manufacturing, and transportation. In construction specifically, nearly half of firms had unfilled positions—a decline from both July and last year’s figures—suggesting some softening in demand for workers.

A seasonally adjusted net 15% of respondents plan to create new jobs within three months—a slight increase but still historically low. Among those hiring or attempting to hire (53%), most reported few or no qualified applicants available.

Compensation trends showed a net increase: seasonally adjusted data indicated that a net 29% raised pay (up two points), while a net 20% plan further increases soon (up three points).

Capital spending remained subdued but edged upward; over half (56%) made outlays in recent months, mostly on equipment or vehicles.

Supply chain disruptions affected just over half of respondents but less so than previously reported; only three percent cited significant impacts while those experiencing no impact rose eight points from July.

Inflation concerns held steady: eleven percent named it their main problem for operating their business for a third consecutive month.

Financing issues were stable with four percent identifying them as their top problem—unchanged from previous data—and only minor changes noted regarding loan accessibility or rates paid on new loans.

Fewer owners expected better general business conditions ahead; this measure fell two points from July to net -34%. Only fourteen percent believed it was currently a good time for expansion—a slight drop month-over-month.

Taxes continued as another major concern at seventeen percent—second only to labor quality—with government regulations ranking next at nine percent following a one-point rise.

The survey underpinning these findings is part of ongoing research conducted monthly by NFIB’s Research Center using randomly selected members’ responses dating back decades.