Report: Inflation remains biggest issue for small business owners in Michigan

The latest NFIB Small Business Optimism Index underscores the impact of rising costs on small and independent businesses in Michigan, says Amanda Fisher, state director of NFIB Michigan in Lansing.

“Michigan's small business owners are all too aware of the ongoing cost pressures their companies face,” Fisher said. “The Michigan Supreme Court's recent decision on paid sick leave and minimum wage will only exacerbate these pressures on Main Street. We hope Michigan's elected officials will soon take action to help small businesses across the state.”

The NFIB Small Business Optimism Index rose 2.2 points to 93.7 in July, the highest since February 2022. However, this is the 31st.^st Month in a row below the 50-year average of 98.

Inflation remains the most important issue for small business owners: 25 percent say it is the most important problem in running their business, four percentage points more than in June.

“Despite this increased optimism, the road ahead remains tough for the nation's small business owners,” says Bill Dunkelberg, chief economist at NFIB. ​​”Cost pressures, particularly labor costs, continue to weigh on small businesses' operations and impact their profits. Owners face unpredictable months, not knowing how future economic conditions or government policies will affect them.”

Key findings include:

• Seasonally adjusted, 33 percent reported a net salary increase in July, five percentage points less than in June and the lowest figure since April 2021.
• Net, 2 percent (seasonally adjusted) of owners plan to invest in inventory in the coming months, four percentage points more than in June. The last time inventory investment plans were positive was in October 2022.
• The net share of owners expecting higher real sales figures rose by four percentage points in July to a net minus 9 percent (seasonally adjusted), the highest figure this year.
• The net percentage of owners increasing average selling prices fell five percentage points since June to a seasonally adjusted net increase of 22 percent.
• Seasonally adjusted, planned prices rose by 24 percent (minus two percentage points) in July. This is the lowest value since April 2023.
• 38 percent (seasonally adjusted) of all owners reported vacancies that they were unable to fill in the current period. That is one percentage point more than in June.

According to the NFIB's monthly employment report, a seasonally adjusted 38 percent of all small business owners reported job openings they were unable to fill in their current period, up one percentage point from June. Of the 57 percent of owners who hired or attempted to hire employees in July, 86 percent reported there were few or no qualified applicants for the positions they wanted to fill.

Fifty-four percent of owners reported capital expenditures in the past six months, up two percent from June. Of those who spent, 36 percent said they spent on new equipment, 22 percent purchased vehicles and 15 percent improved or expanded facilities. Ten percent spent money on new fixtures and furniture and 7 percent purchased new buildings or land for expansion. 23 percent (seasonally adjusted) plan capital expenditures in the next six months, unchanged for the third month in a row.

A net minus of 16 percent of all owners (seasonally adjusted) reported higher nominal sales over the past three months. The net percentage of owners expecting higher real sales increased by four points to a net minus of 9 percent (seasonally adjusted), the highest this year.

The net share of owners reporting inventory increases fell by six percentage points to minus 9 percent, the lowest level since August 2020. Not seasonally adjusted, 11 percent reported inventory increases and 17 percent reported inventory reductions.

In July, a net minus 4 percent (seasonally adjusted) of owners considered current inventory levels to be “too low,” two percentage points less than in June. A net 2 percent (seasonally adjusted) of owners plan to invest in inventory in the coming months, four percentage points more than in June. The last time this figure was positive was in October 2022.

The net percentage of owners raising average sales prices fell five percentage points from June to 22 percent, seasonally adjusted. Twenty-five percent of owners said inflation was their biggest problem in running their business. On an unadjusted basis, 13 percent reported lower average sales prices and 36 percent reported higher average prices.

Price increases occurred most frequently in the financial sector (57 percent higher, 6 percent lower), wholesale trade (47 percent higher, 9 percent lower), retail trade (40 percent higher, 14 percent lower) and construction (38 percent higher, 7 percent lower). Seasonally adjusted, net price increases of 24 percent are planned for July. This is the lowest figure since April 2023.

Seasonally adjusted, a net 33 percent said they plan to increase compensation, five points lower than in June and the lowest since April 2021. Seasonally adjusted, a net 18 percent plan to increase compensation in the next three months, four points lower than in June. Nine percent of owners cited labor costs as their biggest business problem, two points lower than in June and just four points lower than the highest value of 13 percent in December 2021. Nineteen percent said labor quality was their biggest business problem, after inflation as the most important problem.

The frequency of reports of positive profit developments was a net minus 30 percent (seasonally adjusted), one percentage point worse than in June. Of the owners who reported lower profits, 33 percent blamed weaker sales, 17 percent blamed increased material costs, 11 percent blamed labor costs and 10 percent blamed lower selling prices. Of the owners who reported higher profits, 45 percent attributed sales volumes, 31 percent cited the usual seasonal fluctuations and 11 percent blamed higher selling prices.

Two percent of owners said their entire credit needs were not met. Twenty-five percent said their entire credit needs were met, and 62 percent said they were not interested in getting a loan. A net 6 percent said they had a harder time getting a loan on their last loan than on previous attempts.

Three percent of owners said financing was their biggest business problem in July, one percentage point less than in June.

The NFIB Research Center has collected quarterly data on small business economic trends since the fourth quarter of 1973 and monthly data since 1986. Survey participants are randomly selected from the NFIB membership. The report is released on the second Tuesday of each month. This survey was conducted in July 2024.

Since 1943, the NFIB has represented the interests of America's small and independent business owners in Washington, DC, and all 50 state capitals. The NFIB is a nonprofit, nonpartisan, and member-supported organization dedicated exclusively to small and independent businesses.

For more information, see nfib.com/.