Small Business Sectors Face Economic Challenges

Small businesses are increasingly faced with excess inventories and lower sales

A report by the National Federation of Independent Business (NFIB) found small businesses are continuing to confront economic challenges in the construction, manufacturing, retail and services industries.

For the construction industry, the NFIB's optimism index was 91.3 in July, down 1.2 points from April’s quarterly report. Owners in construction had the highest percentage of unfilled job openings among industries tracked at 62%, up four points from April. Seventy-three percent of construction firms reported raising prices in July, down eight points from the last quarter but still historically high.

By contrast, manufacturing sector respondents were more optimistic, with an optimism index reading of 93.2. However, over half or 59% of firms reported unfilled job openings, second only to the construction industry. Future sales expectations declined 28 points in the latest quarter, a historically poor reading.

In the retail industry, owners’ expectations about economic conditions over the next six months declined to a net negative 53% as retailers struggled to clear excess inventory. Zero percent of retailers reported current inventory levels were “too low.”

"The pessimism among small businesses, especially in construction and retail, mirrors where the weakness is greatest in the overall economy. The housing market, in particular, will take the longest to heal given the path of interest rates," said Caleb Silver, Editor-in-Chief of Investopedia.

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