The nation’s small business owners remain optimistic, although their optimism grew more cautious in the month of June. That’s the finding of the National Federation of Independent Business (NFIB) Small Business Optimism Index. 

While optimism remains at historically high levels, the June figure dropped 1.7 points to 103.3, reversing the gain posted in May. The uncertainty component of the Index rose substantially, increasing seven points to the highest level since March 2017.

“Last month, small business owners curbed spending, sales expectations and profits both fell, and the outlook for expansion dampened,” said NFIB President and CEO Juanita D. Duggan. “When you add difficulty finding qualified workers and harmful state-level laws and regulations, you’re left with a volatile mix where uncertainty has increased to levels not seen in more than two years.”  

Six components of the NFIB index fell in June, three improved, and one remain unchanged. 

The NFIB index showed capital spending plans and reports of actual spending fell in June. The inventory component strengthened last month with owners saying existing inventory stocks were lean and planning to add to them. 

Sales and earnings trends softened, while expected credit conditions remained favorable.  There were more small business owners who said last month they expect credit conditions to tighten rather than ease by a two-to-one margin, with most expecting no change.

While state specific data is not available, the head of NFIB Florida says the state’s small business owners remain optimistic.

“Our members may be feeling a little more cautious, but, overall, small business optimism is still at historically high levels,” said state Director Bill Herrle.

Another sign of uncertainty among small business owners is that twenty-six percent of owners plan capital outlays in the next few months. That’s down four points, and an indication there is more reluctance to make major spending commitments when the future becomes less certain. 

Fifty-four percent of small businesses reported capital outlays, down 10 points. Of those making expenditures, 40 percent reported spending on new equipment (down four points), 22 percent acquired vehicles (down seven points), and 12 percent improved or expanded facilities (down seven points). 

The net percent of owners reporting inventory increases fell two points to a net zero percent, indicating no further building in inventory stocks in June. The net percent of owners viewing current inventory stocks as “too low” rose four points to a net zero percent, overall balance.  Major imbalances reported in May have been resolved in most industries with the exception of manufacturing.

The net percent of owners planning to expand inventory holdings did increase one point to a net three percent. 

A net seven percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down two percentage points.

The net percent of owners expecting higher real sales volumes fell six points to a net 17 percent of owners. Excluding the government shutdown earlier this year, this is the weakest reading since September 2017.

“Contextually, owners expecting higher real sales volumes averaged a net negative three percent in the 12 months leading up to November 2016, making the current reading look relatively good, but not as good as the 31 percent reading in May of last year,” said NFIB Chief Economist William Dunkelberg. “The economy is still advancing at a solid pace, but it is expected to be a slower pace than the first quarter.”