US Small Business Sentiment Up in May

• U.S. small-business confidence and hiring plans increased in May to their highest levels of the year. However, the looming U.S. presidential election also drove uncertainty to nearly a four-year high, a survey showed on Tuesday.
• The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose eight-tenths of a point to 90.5 last month, the second consecutive month it has risen after slumping in March to the lowest level since December 2012. Despite the gain, it was the 29th straight month the index was below the 50-year average of 98. The NFIB's Uncertainty Index rose nine points to 85, the highest reading since November 2020, the month the last U.S. presidential election occurred.
• 22% of owners reported that inflation was their single most important problem in operating their business, unchanged from April. The share of businesses planning price hikes increased two points to 28%. The net per cent of owners raising average selling prices was 25%, also unchanged from April. The Federal Reserve is keenly monitoring the pace of price increases as it tries to return inflation to its 2% target.
• There were some indications that small business owners may be beginning to pull back on raising wages. A net 37% of owners reported increasing compensation, down one point from 38% in April, while 18% planned to boost compensation over the next three months, down three points and the lowest reading since March 2021.
• Small businesses have increasingly felt the pressure amidst persistent inflation and high borrowing costs. The U.S. central bank on Wednesday is expected to leave its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since last July. The Fed has raised its policy rate by 525 basis points since March 2022 to quash elevated inflation.

(Source: Reuters)