The NFIB Small Business Optimism Index came in at 99.7 in July, down 2.8 points from the previous month, according to a survey compiled by the National Federation of Independent Business released Tuesday. This decline reverses the 2.9-point gain of June.
The reading is below the 102.0 level expected by economists polled by The Wall Street Journal.
"Small business owners are losing confidence in the strength of the economy and expect a slowdown in job creation," NFIB chief economist Bill Dunkelberg said. As owners look for qualified workers, they are also reporting that supply chain disruptions are having an impact on their businesses, he said.
The NFIB is a monthly snapshot of small businesses in the U.S., which account for nearly half of private sector jobs. Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy.
Six of the 10 components that form the index declined in July, while three increased compared with June and one remained unchanged.
Small businesses continued to encounter difficulties in finding workers and filling open positions. Around 49% of owners reported job openings that couldn't be filled, an increase of three points from June and a 48-year record high.
Job creation plans declined slightly in July, while the number of owners who think currently it is a good time to expand increased slightly.
A net 12% of owners view current inventory stocks as "too low" in July, up one point from June and a 48-year record-high reading.
"Ultimately, owners could sell more if they could acquire more supplies and inventories from their supply chains," Mr. Dunkelberg said.
A net 6% of owners plan inventory investment in the coming months, down five points from June.
In July, the percentage of respondents raising average selling prices decreased one point to 46%. Price increases were most frequent in wholesale, retail and manufacturing.
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