According to the National Federation of Independent Business (NFIB), U.S. small-business confidence fell in August, reversing the previous month's increase. The Small Business Optimism Index dropped by 2.5 points to 91.2, while the Uncertainty Index rose to 92, the highest since October 2020.
Economists caution against overanalyzing the decline in sentiment, attributing it to political influences and a lackluster stock market performance as the presidential election approaches. The net share of businesses expecting higher sales volumes in the next three months also decreased.
Despite concerns about inflation and labor shortages, some small business owners are planning to increase compensation in the coming months. Job creation plans have declined, reflecting the overall slowdown in nonfarm payroll gains.
On the positive side, the share of owners planning capital investment has increased, with many investing in new equipment and facilities. The Federal Reserve is expected to cut interest rates by 25 basis points next week, signaling the start of an easing cycle after keeping rates steady for over a year.
In conclusion, small-business confidence has dipped due to election uncertainty and sales expectations, but there are signs of resilience with plans for capital investment and compensation increases. The upcoming interest rate cut by the Federal Reserve could provide a boost to small businesses in the current economic climate.