By Ethan Faverino |

The NFIB Small Business Optimism Index declined 0.6 points in October to 98.2 points. Despite the small decline, it remains above its 52-year historical average of 98. In a positive sign, the Uncertainty index dropped 12 points to 88, marking the lowest level this year.

NFIB Chief Economist Bill Dunkelberg said, “Optimism among small businesses declined slightly in October as owners report lower sales and reduced profits. Additionally, many firms are still navigating a labor shortage and want to hire but are having difficulty doing so, with labor quality being the top issue for Main Street.”

Labor challenges persisted, with a seasonally adjusted 32% of owners reporting unfilled job openings, unchanged for the second straight month, and the lowest since December 2020.

Labor quality was cited by 27% of owners as their single most important problem, up 9 points from September and the highest since November 2021, when it reached 29%. It ranked 11 points above taxes, the second-largest concern. Of the 56% of owners hiring or trying to hire, 88% reported little to no qualified applicants.

Sales and profits declined, as a net negative 13% of owners reported higher nominal sales over the past three months, down 6 points. Positive profit trends fell 9 points to a net negative 25%—the largest contributor to the Index decline.

Among those with lower profits, 33% blamed weaker sales, 16% noted rising material costs, and 9% pointed to both labor costs and price changes.

Pricing pressures eased slightly, with the net percentage of owners raising average selling prices falling from 24% to 21%, though it is still above the historical monthly average of 13%.

30% of small businesses plan to raise prices in the next three months, just down 1 point. An unadjusted 31% reported higher prices, while just 12% reported lower prices.

Inventory gains dropped 3 points to a net negative of 6%. 10% reported stock increases while 15% reported reductions. Supply chain disruptions were cited as the biggest reason for inventory problems, with 60% of owners saying it affected them to some extent.

Capital investments saw 55% of owners reporting outlays in the past six months. Among them, 36% spent on new equipment, 22% on vehicles, and 14% on facility improvements or expansions. 23% plan outlays in the six months.

20% of small business owners expect better conditions, the lowest since April, but well above the historical average of 4%. Only 13% view it as a good time to expand. Business health assessments shifted, with 12% rating their business as excellent, 51% good, 33% fair, and 4% poor.

“A reduction in sales and profits has certainly taken a toll on small business owners’ optimism,” NFIB State Director Chad Heinrich said. “Despite these challenges and the ongoing labor shortage, our members are resilient, with many still trying to create good-paying jobs for Arizonans.”

Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.