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Economy in Brief

U.S. Small Businesses Optimism Recovers
by Tom Moeller  January 14, 2014

The National Federation of Independent Business reported that its Small Business Optimism Index improved to 93.9 during December and returned to its September level. The latest figure remained down sharply, however, from the May high of 94.4. For all of last year the sentiment index rose to 92.4, its highest level since 2007.

An improved 8% expected higher real sales in six months, the highest level of the range during the last nine months. The percentage of firms expecting the economy to improve also rose to -11% and made up declines during the prior two months. Suggesting that labor market conditions remained tight, 23 percent of firms had positions they were not able to fill, the most since before the recession. An increased 8% were planning to increase employment and a lessened 38% of firms found few or no qualified applicants for job openings, the least since May. Twenty six percent of firms were planning capital expenditures in the next 3-6 months, the most of the economic recovery.

One percent of firms were lowering average selling prices, but a steady 19% planned to raise them in the future. A greatly increased 13% planned to increase worker compensation, the most since April 2008.

The most important problems faced by small business were taxes (23%), government requirements (20%), poor sales (14%), insurance cost & availability (10%), quality of labor (8%), competition from large businesses (7%), cost of labor (4%), inflation (4%) 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 Dec Nov Oct Dec'12 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 93.9 92.5 91.6 88.0 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (Net %) 8 3 2 -2 4 2 3
Firms Expecting Economy To Improve (Net %) -11 -20 -17 -35 -15 -9 -9
Firms Planning to Increase Employment (Net %) 8 9 5 1 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (Net %) 38 44 40 33 39 35 32
Firms Reporting That Credit Was Harder To Get (Net %) 7 6 6 9 8 8 10
Firms Raising Avg. Selling Prices (Net %) -1 2 5 0 2 4 5
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