The NFIB small business optimism index is down 1.1 points to 89.0 in April from 90.1 in March and is below 93.2 in April 2022. The NFIB says the index remains below the 49-year average of 98 for the 16th month in a row. The April reading is below the consensus of 89.7 in an Econoday survey and is the lowest since 88.8 in January 2013. Although the uncertainty index is down 2 points to 72 in April from 74 in March, the level of uncertainty remains elevated in the first months of 2023.

Four of 10 index components are up, 6 are down, and none are unchanged. The largest declines are 6 points to minus 5 percent for inventories, 5 points to minus 23 percent for the earnings trend, and 4 points to minus 19 percent for expected higher sales. Expectations for the economy to improve are down 2 points to minus 49 percent while that for now is a good time to expand is up 1 point to 3 percent. The composition of the index points to a weakening in the outlook while present conditions have not worsened from the prior month and in some cases have inched higher.

The report notes that in April, 24 percent of respondents said finding qualified labor is their top problem, overtaking the 23 percent that named inflation as their primary concern. Elsewhere in the report, among the most important reasons for the expansion outlook is an uptick in the political climate cited as now is not a good time to expand to 10 in April from 8 in March. There's a hint here that the debt limit standoff could be affecting decisions by small business owners.

The small business optimism index has been below, and often deeply below, the historical average of 98 for 15 months in a row. April's consensus is 89.7 versus 90.1 in March.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market - especially small caps.