Optimism at small U.S. businesses faded in April as inflation became more of a concern, according to a survey released on Tuesday.
The National Federation of Independent Business said its index of small business optimism fell for the third straight month, dropping 0.5 point to 96.8 last month.
"Overall, expectations for the economy are soft," William Dunkelberg, NFIB's chief economist, said in a statement. "Real growth will continue, but closer to 2% than to 3%."
"While growth is slower, inflation pressures are growing," Dunkelberg said. "Higher labor costs are not helping the inflation situation."
Twenty-six percent of the owners surveyed reported higher labor compensation, while only 18% passed those and other costs on to their customers, the NFIB said.
"The percent raising compensation dropped from the cycle high of 30% reached in February, and the percent raising prices has increased, lessening the impact on profits, but not helping the inflation situation," Dunkelberg said.
The earnings picture is not improving with energy costs on the rise. Labor compensation will pressure profit margins all year, the NFIB said.
During the next three months, just 13% of owners polled plan to create new jobs, mostly in construction and manufacturing.
The rise in projected construction hiring is seasonal, while that in manufacturing is more likely in response to solid orders. The top regions for job creation were the Pacific states, the Mountain states and New England, the NFIB said.
On Friday, the Labor Department put the unemployment rate for April at 4.5%. The NFIB said the tight labor market has affected small-business owners' ability to find qualified workers.
Twenty-six percent of the firms reported unfilled job openings, unchanged from March, while 12% said the availability of qualified labor was their top business problem, unchanged from February and March.
The poll is based on 1,703 respondents to the April survey of a random sample of NFIB's 600,000 member firms questioned through April 30.