The NFIB small business optimism index is up 1.0 point to 91.5 in June after 90.5 in May, and similar to 91.0 in June 2023. The June reading is above the consensus of 90.3 in the Econoday survey of forecasters. In many respects the conditions reflected in the index are little changed from the prior month.

In June, half of the index components were unchanged. The only decrease is 5 points to 37 percent in the current jobs component. The reading suggests that the number of job openings are back to levels consistent with modest expansion and an improved supply of labor. Among increases, the largest is a 6 point rise in current inventories (inventories too low) to minus 2 percent. Plans to increase inventories are up 4 points to minus 2 percent in June. Readings of around neutral suggest that inventories are being managed without too much accumulation that will need to be gotten ride of or too little for filling orders. However, the significant move is a 5 point increase in expectations for the economy to improve to minus 25 percent in June. This is the highest since minus 20 in July 2021. This is still a relatively gloomy outlook, but two months of increases suggest the outlook has lifted slightly.

The uncertainty index is down to 82 in June after 85 in May but remains elevated. Small businesses continue to see two problems dominating the outlook. In June, 21 percent of owners reported inflation is their single most important problem followed by 19 percent saying quality of labor.

With 50 years of data, the small business optimism index has been below the historical average of 98 since January 2022. Yet May's 90.5 was up from April's 89.7 for the best showing so far this year. June's consensus is 90.3.

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.