In January, the National Federation of Independent Business published a report stating that U.S. small business sentiment reached its lowest point since May 2023. The monthly sentiment index fell to 89.9 from 91.9 in December, marking the largest decrease since December 2022. Despite these challenges, small business owners are making adjustments to respond to the economic challenges they are facing.
Labor quality and inflation were the top concerns for business owners in January. Sales conditions have tightened, with the share of owners reporting profit growth falling to a net negative 30% from a net negative 25% in December. This coincides with the Federal Reserve’s rate hike campaign in 2022 to curb inflation, though the Fed has since signaled that rate hikes are over and it should be in a position to lower rates later this year.
Looking ahead, the portion of owners expecting better business conditions in the next six months fell 2 points to negative 38%. Additionally, the share of owners who expect higher real sales fell 12 points to negative 16% in January. These statistics paint a sobering picture of the challenges faced by small business owners and highlight their need for support from policymakers and other stakeholders as they navigate these difficult times.