Inflation and volatility have business owners feeling more pessimistic

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The vibes are surprisingly good in some corners of society. The NBA Finals has Knicks fans dancing in the streets. Early successes like The Devil Wears Prada 2 and Backrooms are promising lead-ins to the summer blockbuster season. Oh, and the May jobs report was surprisingly strong.

But not everyone is feeling so cheery. Quite the opposite, in fact.

Small businesses were more pessimistic in May and maintained historically high feelings of uncertainty, according to the National Federation of Independent Business’s (NFIB) latest Small Business Economic Trends report.

NFIB’s business optimism index fell 0.6 points from April to 95.3 in May, and its uncertainty index rose three points to 91—which is “well above” the survey’s historical average of 68. The indices were based on survey responses from roughly 500 NFIB members, the majority of whom had nine or fewer employees.

To boot, fewer small businesses said they planned to increase headcount and make capital expenditures in May than in April. A net 3% of respondents said they expect the economy to improve, one percentage point lower than April. (The net is calculated by subtracting the percentage of owners who gave a negative response from the percentage that responded positively.)

Bill Dunkelberg, NFIB’s chief economist, said that AI has drummed up some excitement in the overall economy. (Look no further than the fanfare surrounding SpaceX’s pending IPO.)

Beyond that, “the overall picture is divided,” Dunkelberg said in a statement. “More small business owners are struggling with significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared to their larger corporate competitors.”

In the next three months, a net 34% of respondents planned to increase prices, “up 7 points from April and marking the highest reading since July 2022,” the NFIB said in its report.

The new normal. Facing “rising pressure across AI, supply chain and extreme weather risks,” businesses large and small are increasingly embedding risk into their operations and adopting more proactive risk-management practices, the insurance broker and risk consultant Gallagher noted in announcing its annual Business Owners Survey, released on June 10.

Take supply chains, for instance: Gallagher noted in the survey’s news release that “relentless trade uncertainty and supply chain volatility are now a standard operating challenge;” 63% of the 1,000 US business owners surveyed (whose companies range in size from 1–50 to 1,001 employees) registered concern about supply chain disruptions impacting their companies this year. A majority (61%) are responding by creating redundancy in their supply chains.

“What we’re seeing with business owners is a meaningful shift toward treating risk management as a business consideration that informs operations, investments and growth,” J. Patrick Gallagher Jr., CEO of Gallagher, said in a statement. “This mindset can help businesses build resilience in an increasingly complex risk environment.”