Small business sentiment logged the biggest drop in 13 months in January, as business owners say inflation and high labor costs are creating headwinds. The National Federation of Independent Business Small Business Optimism headline index began 2024 with a decline from 91.9 in December to 89.9 in January, marking the largest drop since December 2022 and the 25th consecutive month below the 50-year average of 98, according to a report released by NFIB on Tuesday. The reading was the lowest since May 2023. The drop in sentiment comes even as the general economic outlook remains upbeat. It's worth noting that the consumer confidence index increased for a third consecutive month, reaching 114.8 in January, up from 108 in December. The NFIB survey also showed that 5% of business owners blamed financing for major challenges they face, with many of them paying higher interest rates on debt since the Fed began hiking rates nearly two years ago.