The Small Business Index has experienced a decline due to the lack of confidence small businesses have in the economy. The third quarter witnessed an eight-point drop in business confidence.
According to a press release by the U.S. Chamber of Commerce, the index score fell from 69.2 to 61.3, mirroring scores seen in late 2022 and earlier this year. The score of 69.2 was the highest recorded since before the pandemic began. Only a quarter of small businesses perceive the U.S. economy as strong, while a mere 30% believe their local economy is healthy. These doubts about both local and national economies complicate companies' efforts to maximize earnings and aggressively hire with expansion intentions.
Despite their skepticism about the broader economy, small businesses maintain positive views on their own financial situations. The index indicates that nearly two-thirds of small businesses believe they are financially stable and healthy. Moreover, 67% express full confidence in their business cash flows, albeit this is down from 72% last quarter.
Inflation remains the most significant concern for small businesses, with over half stating it as their biggest challenge. This marks the sixth consecutive quarter where at least half of businesses have expressed concerns over inflation, according to the press release. The second major concern is securing enough workers to fill open positions due to labor market competition and worker shortages; companies are having to offer higher pay and better benefits as a result. About 54% of small businesses find it challenging to locate candidates with sufficient work experience or necessary skills for their operations.
Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce, stated: "With inflation still outpacing revenue expectations, small business owners are wary of the future and continue to have an overall negative impression about the national economy." He added: "At the same time, holiday shopping is already setting records this year and most small businesses say they are doing okay despite persistent headwinds."
