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Economy in Brief

U.S. Small Business Optimism Jumps to Highest Level Since 2007
by Tom Moeller  May 13, 2014

Small business sentiment is emerging from the winter doldrums. The National Federation of Independent Business reported that its Small Business Optimism Index jumped to 95.2 during April after its increase to 93.4 in March. The latest level was its highest since October 2007, just before the recession set in.

The gain reflected a jump in the index covering those who expected economic improvement, bringing it to its highest level since August. The percentage of firms indicating that credit was harder to get plunged to its lowest level since September and continued the downward trend in place since 2009. A surge in the percent looking to add to inventories equaled the highest level since 2007. The percentage of firms with positions they were unable to fill also was at the highest point since 2007 and the percent looking to raise employment recovered some of its March decline. Credit conditions were expected to ease by more firms and higher real earnings were projected by the most in two years.

A sharply higher 12% of firms raised average selling prices and a firm 22% of firms planned to raise them in the future. A stable 14% planned to increase worker compensation, the most of the economic recovery.

The most important problems faced by small business were taxes (22%), government requirements (20%), poor sales (15%), quality of labor (9%), competition from large businesses (9%), insurance cost & availability (7%), cost of labor (5%), inflation (5%) and financial & interest rates (1%).

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 Apr Mar Feb Apr'13 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 95.2 93.4 91.4 92.1 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (Net %) 10 12 3 4 4 2 3
Firms Expecting Economy To Improve (Net %) -9 -18 -19 -15 -15 -9 -9
Firms Planning to Increase Employment (Net %) 8 5 7 6 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (Net %) 41 41 40 38 39 35 32
Firms Reporting That Credit Was Harder To Get (Net %) 5 8 8 7 6 8 10
Firms Raising Average Selling Prices (Net %) 12 9 1 3 2 4 5
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