NEW YORK (Reuters) - U.S. small business sentiment fell in February to the lowest level since May due to continued concerns around inflation, according to a report published on Tuesday.

The monthly National Federation of Independent Business sentiment index fell to 89.4 in February from 89.9 in January. The reading marks the 26th-straight-month where the index remained below its 50-year average of 98.

The share of owners citing inflation as their most pressing problem rose 3 points to 23%, the top concern for businesses according to the report. During the Federal Reserve's rate-hike campaign, launched in 2022 and now nearing the end of its cycle, small business owners also have felt the pinch of higher costs and tighter credit conditions.

"While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates," said Bill Dunkelberg, NFIB's chief economist.

"The labor market has also eased slightly as small business owners are having an easier time attracting and retaining employees."

Those surveyed who reported labor difficulties as a top concern fell to 16% from 21% in January, the lowest reading since April 2020.

The share of owners expecting better business conditions on a six-month basis fell 1 point to a net-negative 39%. The portion of owners who expect higher real sales in the next three months rose 6 points to a net-negative 10%.