U.S. small-business optimism falls to three-month low on economy

Sentiment among U.S. small businesses fell in September to a three-month low on less optimism about the economic outlook and greater concern about excess inventory.

The National Federation of Independent Business optimism index declined 2 points to 98.8, according to data out Tuesday. Five of the 10 components that make up the gauge decreased, while three were unchanged.

A net 23% of small-business owners surveyed said they expect better business conditions in the next six months, down 11 percentage points from August. The net share of firms that viewed their inventories as too low sank last month by the most since 1997, which was accompanied by a smaller percentage expecting higher sales.

Owners also grew more anxious about inflation, with 14% of owners reporting that rising costs were their biggest problem in operating their business, up 3 points from August. A net 31% plan to raise prices in the next three months, up 5 points and the largest share since June.

“While most owners evaluate their own business as currently healthy, they are having to manage rising inflationary pressures, slower sales expectations, and ongoing labor market challenges,” Bill Dunkelberg, NFIB chief economist, said in a statement.

The group’s uncertainty index rose 7 points from August to 100 – the highest since February, reflecting a decline in the share of owners saying now is a good time to expand. according to NFIB.

Still, overall business health was generally unchanged compared to August, with 68% of owners rating their business as excellent or good, compared with 27% who said it was just fair.