Small business optimism is up, but. . . . . .

December 18, 2024/Business/

The National Federation of Independent Businesses (NFIB) issued their monthly “Optimism Index” last week and it showed the highest degree of “optimism” among small businesses in America since 2021. That’s great but, there are also conflicting reports that came out that share a degree of caution among businesses.

For instance, this article from CBS News last week made notice of 7,100 retail store closures in 2024 — which is up 69% over the prior year’s number. And, this article and charts from CNBC point out that the latest inflation indicators show a slight uptick in the rate of inflation in November after a long-series of drops until then.

November inflation numbers show that inflation for “all items” came in a rate that prices were 2.7% higher than the same month a year ago after a rate as low as 2.4% in September. And, when stripped of food and energy numbers, inflation came in 3.3% higher after being down to 3.2% in July.

Later today you will hear how the Federal Reserve will deal with this “push/pull” of news that seems quite paradoxal — that is optimism in a world of more business closings and slightly higher inflation. Most people think the Federal Reserve will continue to ease interest rates which should lead to even more optimism but also put pressure on the idea of lower inflation.

You can read the NFIB Optimism Report here. Here are a couple of things I noticed from it that may play a part in your business planning:

54% of small businesses expect to make capital outlays in the next six month

Of that 54%, 39% of them will be spending on new equipment, 22% will be spending on vehicles, and 14% will be spending on facilities.

32% of the small businesses reported employee compensation rising

28% plan to raise compensation in the next three months

Among those who report lower profits, 32% blamed weaker sales, 18% blamed rising costs of materials, 13% blamed higher labor costs, and 9% blamed lower selling prices for the goods or services that they sell.

In the last 4 years, small businesses report that the average interest rate has risen to over 9% from about 4% four years ago.

In an interesting note to this article and one that funeral home owners need to recognize going forward, especially as Death Care rites and rituals are changing, is that Neil Saunders, an analyst with GlobalData made this assumption about all the retail store closings, “However, many of the chains closing stores are those that have problems which go beyond the economy. Their propositions might not be right, their offers might not be what consumers want, and they might not have responded to competitive threats in the right way.”

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