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Economy in Brief

U.S. Small Business Optimism Backpedals
by Tom Moeller  October 8, 2013

The National Federation of Independent Business reported that its Small Business Optimism Index fell to 93.9 last month. This reversed its August improvement to 94.2. The index has been moving sideways for the last six months.

Moving down to its lowest level since April was the percentage of firms expecting the economy to improve. The percentage of businesses planning to increase employment backed away from its August high, while a slightly lower percentage of firms could not fill positions right now. Offsetting these declines was an increased percentage of firms planning capital expenditures. Also, the percentage of firms expecting credit conditions to ease increased as did the percentage saying that now was a good time to expand the business.

Pricing power remains weak. The percentage of firms raising average selling prices fell back to its lowest level in six months. The percentage planning to raise prices, however, recovered to its highest level since February. The percent of firms raising worker compensation surged to its highest since July 2008.

The most important problems faced by small business were government requirements (24%), taxes (a sharply lower 18%), poor sales (17%), quality of labor (10%), insurance cost & availability (8%), competition from large businesses (5%), inflation (5%), cost of labor (5%) and financial & interest rates (2%).

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's SURVEYS database. 

National Federation of Independent Business Sep Aug Jul Sep'12 2012 2011 2010
Small Business Optimism Index (SA, 1986=100) 93.9 94.2 94.1 92.8 92.2 91.4 89.9
Firms Expecting Higher Real Sales In Six Months (Net %) 8 5 7 1 2 3 1
Firms Expecting Economy To Improve (Net %) -10 -2 -6 2 -9 -9 -1
Firms Planning to Increase Employment (Net %) 9 10 9 4 4 3 1
Firms With Few or No Qualified Applicants For Job Openings (Net %) 41 42 40 41 35 32 27
Firms Reporting That Credit Was Harder To Get (Net %) 5 6 6 6 8 10 13
Firms Raising Avg. Selling Prices (Net %) 1 2 4 6 4 5 -12
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