The NFIB Small Business Optimism Index experienced a noticeable decline in February, falling by 2.1 points to a level of 100.7. This drop marks the second consecutive monthly decrease, indicating growing concerns among small business owners about the economic landscape. The percentage of business owners who believe it is an opportune time to expand their ventures has diminished by five points from January, settling at a mere 12%.
Additionally, there has been a significant uptick in the net percentage of owners raising average selling prices, which rose by 10 points to reach a net 32% on a seasonally adjusted basis. This surge suggests that businesses are responding to economic pressures by adjusting their pricing strategies. Conversely, the proportion of owners citing inflation as their primary concern has slightly decreased by two points, now standing at 16%.
The NFIB’s Uncertainty Index also climbed by four points to 104, marking the second-highest reading ever recorded. This reflects heightened uncertainty amidst fluctuating economic conditions. Bill Dunkelberg, NFIB's chief economist, commented on the situation:
"Uncertainty is high and rising on Main Street and for many reasons. Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall." – Bill Dunkelberg, NFIB chief economist
In contrast, the S&P 500 has recently broken its 200-day moving average during a period when the market was extended. This development adds to the complexity of the current economic scenario, further fueling uncertainty among investors and business owners alike.
Amidst these developments, U.S. economic policy growth and trade policy uncertainty have seen updates, reflecting an intertwined relationship with a contemporaneous correlation of -0.20. The U.S. weighted average tariff rate is projected to rise to 9.1%, adding another layer of complexity to the economic environment.
In financial markets, the spot price of gold has increased by 0.8%, reaching $2,912.41 per ounce, signaling investor caution and a potential flight to safer assets.
The changing dynamics have also affected major corporations. Citigroup has adjusted its rating on U.S. equities to neutral from an overweight position that it maintained since October 2023. This shift underscores growing caution in equity markets amid prevailing uncertainties.
In the media industry, the Financial Times has successfully transformed into a digital and subscription-based model, achieving revenues of £500 million for the first time in 2023. It now boasts a global paying audience of 2.9 million people, highlighting a significant shift towards digital consumption.
Political economist Lizzy Galbraith emphasized the impact of governmental actions on economic perceptions:
"President Trump’s rapid pace of executive actions, especially on trade, has led us to update our scenarios in several important respects." – Lizzy Galbraith, political economist at Aberdeen
The NFIB Small Business Optimism Index is traditionally considered a Republican-leaning survey, yet it remains indicative of broader economic sentiments across party lines. With the NFIB's Uncertainty Index reaching its second-highest recorded reading, small business owners continue to navigate an uncertain path.