Small business optimism fell in August, according to a new study, as American companies struggled to hire new workers amid persistent inflation.

The National Federation of Independent Business (NFIB), which surveyed more than 600 small businesses, reported on Sept. 12 a decline in optimism in August, after three consecutive months of rising sentiment.

The U.S. economy continued to grow last month, despite higher interest rates and a tumbling real estate market.

Overall inflation slowed over the past year, as the Federal Reserve aggressively raised interest rates to their highest level in 22 years.

Although consumer prices slightly rose from July, many business owners are increasingly worried about future price conditions, despite solid consumer spending.

Businesses Lose Confidence as Summer Spending Ends

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The NFIB’s Small Business Optimism Index for August dropped 0.6 percent to 91.3, the 20th consecutive month below the 49-year average of 98.

Expectations of improved business conditions over the next six months fell seven points in August to a net negative 37 percent, an improvement from last June’s negative 61 percent, but still at recession levels.

The percentage of owners who expected sales to rise decreased two points from the previous month, to a net negative 14 percent, a three-year low.

Twenty-three percent of small business owners reported inflation as their single most important problem in August, a rise of rise of 2 percent.

Owing to tighter loan requirements, the percentage of firms planning capital outlays fell to a four-month low, but most small-business owners said that all of their credit needs were met.

Businesses that raised their average selling prices in August rose by 2 percent to an annual seasonally adjusted 27 percent.

About 40 percent of small business owners told surveyors that they had difficulty filling positions last month, a slight decline from July and a historic high.

Although fewer firms said they would boost compensation in August, 26 percent said they planned to raise compensation in the next three months.

The construction, service, and manufacturing sectors reported the greatest difficulty filling open positions, according to the survey.

It comes after the Labor Department reported new job openings falling below 9 million in July for the first time since March 2021.

US Households Expected to Face Challenges This Fall

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Many U.S. households are facing challenges toward the end of the year, including the resumption of student loan payments, falling cash savings, a tighter credit market, and fears of another round of Fed rate hikes.

American consumer spending jumped 0.8 percent in July, led by the entertainment and travel sectors, which saw a summer boost, while retail sales slightly increased by 0.7 percent.

However, as the summer winds down, the hospitality industry is bracing for a sudden decline in spending as pandemic-era cash runs out, according to the Fed’s latest “Beige Book” report this month.

Morgan Stanley analysts warned in a recent note of a “hangover effect on consumption” in the fourth quarter, which could lead to slower economic growth.

It is unknown how any of these factors will affect consumers, but fewer economists expect a serious recession after repeated warnings of a downturn over the past year.

Optimism over the strength of the U.S. economy has jumped in recent months and some economists believe that the Fed could actually pull off a soft landing and lower inflation to its 2 percent target, without causing a surge in unemployment.

Last week, Goldman Sachs reduced its odds of a U.S. recession over the next year to 15 percent, from 35 percent in March, when the spring bank crisis hit the markets.