By Safiyah Riddle
(Reuters) - U.S. small business confidence edged up to an eight-month high in July, as concerns about inflation fell to the lowest level in nearly two years, a report released on Tuesday showed.
The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose nine-tenths of a point to 91.1 last month, hitting the highest level since November 2022. Disinflation in July appeared to resonate with small businesses as only 21% stated that inflation was their biggest concern - the lowest reading since November 2021 and down 13 points from a year earlier.
The continued improvement in optimism appeared to translate in investments in labor and capital investment plans: More than a quarter of firms reported plans to invest in capital, and 17% reported plans to increase employment, both 2 percentage points higher than in the prior month.
On top of that, small businesses recorded their least-pessimistic view of the near-term economic prospects since August 2021 as NFIB's general business conditions outlook index climbed 10 points to negative 30. U.S. small businesses have had a net negative view of the business climate since December 2020, the month after former President Donald Trump lost his re-election bid.
But softening consumer demand weakened confidence in the ability to benefit from consistent price growth, and the number of firms planning for price increases fell to a net 27% - the lowest reading since April.
That is welcome news for the Federal Reserve, whose 525 basis points worth of interest rate hikes also appear to be moderating demand for credit for small businesses: 62% said they were not interested in a loan, up 2 percentage points from June, and 25% reported all their credit needs met, a decrease of 2 percentage points from a month earlier.
Still, businesses notably didn't report that credit is getting harder to acquire, with an unchanged 6% saying their most recent loan was harder to get than the one before.