Small firms more confident as sales improve, but hiring lags

Core Insights - Small-business owners reported increased optimism in August, with the NFIB optimism index rising to 100.8, indicating a more stable outlook compared to earlier in the year [1][2][3] Sales Expectations - Expectations for sales improved significantly, with a net 12% of owners predicting higher sales volumes over the next three months, contributing to the rise in optimism [2][3] - Over two-thirds of surveyed owners described their business as in good or excellent health, an improvement from July [2] Labor Market Challenges - Labor quality remains a significant concern, with about one in three small businesses unable to fill job openings, despite this being the lowest share in five years [3][4] - Companies in construction and manufacturing reported the most difficulty in finding skilled workers, with over half of owners receiving few or no qualified applicants [4] Pricing and Inflation - Only 21% of owners raised prices in August, the lowest level this year, indicating potential easing of inflation pressures [4] - Plans for future price increases also declined, suggesting a cooling of inflation expectations [4] Borrowing and Investment Sentiment - Borrowing costs improved slightly, with interest rates on short-term loans at their lowest since mid-2023 [5] - Despite new federal tax breaks aimed at encouraging investment, only about one in five owners plan major purchases in the next six months, a slight decrease from July [5][6] Business Outlook - Business owners remain cautious, with just over one-third expecting overall conditions to improve in the coming months, and only 14% believing it is a good time to expand [7]