Sales Trends On Main Street

Since 2020, the percent of firms reporting positive sales trends has trended downward (Chart 1). Reports of gains rose strongly between 2016 and 2019 but were interrupted by Covid in 2020. Sales then improved, but temporarily. After the initial improvement, sales have steadily declined ever since. Most recently, there has been an uptick in positive reports, but no clear trend has emerged. Sales are the lifeblood of small firms, supporting hiring and production activities.

Looking ahead to the next three months, owners are not very optimistic about future sales. In May, only 17% of all firms expect their real sales volume to increase, while 31% predict a decline (Chart 2). Nearly half (47%) of the non-professional service firms were optimistic about future sales trends, although nearly as many (40%) expect declines. Firms in the construction industry are quite optimistic as well, although about as many see a darker picture. Manufacturing firms seem to be on board with President Trump’s re-industrialization campaign, landing at a net 8% expecting improved sales. However, only 5% of professional service firms expect sales gains, and 41% expect declines.

Looking at the NFIB Index of Small Business Optimism by industry (Chart 3), significant differences appear as well (expected sales are included in the Index). Optimism is highest in the construction and manufacturing industries, followed by finance and non-professional services (which are also leaders in positive sales expectations, as seen in Chart 2). The wholesale, retail, and agriculture industries, which are more directly dependent on consumer spending, all scored below 100 on the Index.

Overall, the expectations for sales improvement are not very optimistic. Significant variations across industries are likely a reflection of policy uncertainty and expectations (interest rates, tax policy, and industrial focus), most of which will hopefully be resolved over the next few months.