• Small Business Optimism Drops to 48-Year Low, Office Use Hits Pandemic High, Producer Prices Climb

    Small Business Optimism Hits 48-Year Low

    Inflation is weighing heavily on small business optimism, as many operators trim capital spending across the board, including equipment and building purchases, according to the latest monthly survey data from the National Federation of Independent Business.

    The advocacy group’s optimism index fell to its lowest level in the 48 years of the survey, dropping 0.1 point in May to 93.1, marking the fifth consecutive month below the average of 98. The composite index is compiled through survey responses from group members nationwide, covering operator outlooks on metrics such as increasing sales, expanding business and boosting employment and inventories.

    “Inflation continues to outpace compensation, which has reduced real incomes across the nation,” Bill Dunkelberg, chief economist for the Washington-based group, said in a statement Tuesday. “Small business owners remain very pessimistic about the second half of the year as supply chain disruptions, inflation and the labor shortage are not easing.”

    The May survey found that 51% of business owners reported job openings that could not be filled, up 4 percentage points from April, and 39% reported supply-chain disruptions had a significant impact on their business, up 3 points.

    Fifty-three percent of respondents reported capital outlays over the past six months on things including equipment, vehicles and buildings, down 1 percentage point from April. Twenty-five percent have planned capital outlays in the next few months, down 2 points from April.

    Office Use Hits Pandemic High

    Office use bounced back from the Memorial Day holiday to reach a pandemic high of 44% for the week ending June 8, according to the latest national numbers from security technology provider Kastle Systems.

    The Falls Church, Virginia-based company’s weekly "Back to Work Barometer," gauging office use in 10 large cities based on anonymous keycard data from client properties, rose 2.8 percentage points from the prior week to reach its highest level since the start of the pandemic in March 2020.

    Most major cities have yet to reach 50% of pre-pandemic office attendance, according to the tracker. Austin, Texas, remains the only city in the barometer to have broken the 60% mark, rising more than 5 points in the latest report to reach 61.3%.

    After Austin, the highest attendance rates were seen in Houston at 56.2%, Dallas at 50.9%, Los Angeles at 41.6% and Chicago at 41.4%.

    Producer Prices Rise

    Producer prices, closely watched as predictors of consumer prices and potential real estate demand, increased 0.8% month over month in May, the Labor Department reported Tuesday. The increase for all produced goods and services was 10.8% from May 2021.

    On the goods side, 40% of the 1.4% month-to-month rise was attributable to gasoline prices, which increased 8.4%. Other goods showing price increases included jet fuel, residential natural gas, steel mill products, diesel fuel and processed young chickens.

    Some potential relief for restaurant operators came from a 9.5% price decline for beef and veal. Building developers and operators saw lower prices for iron and steel scrap as well as commercial electric power.

    For services, an overall 0.4% month-over-month price rise was largely due to a 2.9% increase for truck transportation of freight, the Labor Department reported. Prices also rose for services including securities brokerage, equipment and chemicals wholesaling and auto parts retailing.

    All of this happened as the government reported last week that May’s annual consumer inflation rate reached a 40-year high of 8.6%.

    Source: www.CoStar.com