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Economy in Brief

U.S. Small Business Optimism Improves Further
by Tom Moeller  June 10, 2014

The National Federation of Independent Business reported that its Small Business Optimism Index gained to 96.6 during May after improvement to 95.2 in April. The latest level was its highest since September 2007, just before the recession began.

Plans for the future remained constructive. The increase in total optimism again reflected improvement in the index covering those who expected economic improvement, bringing it to the highest level (0%) since October 2012. The percentage of firms expecting higher real sales in six months gained moderately to the highest level (15%) since January. The percentage of firms planning to increase employment (10%) was the highest, also since January.

Holding back small business optimism were the readings related to near-term economic activity. The percentage with few or no qualified applicants for job openings jumped to its highest point (46%) since October 2007. The percentage of firms indicating that inventories were too low (-2%) reversed the improvement during the last four months and the percentage looking to raise capital expenditures equaled the lows (24%) of the last nine months.

The percentage of firms with positions not able to fill right now (24%) held at its highest level since January 2008 and those indicating that credit was harder to get (6%) ticked up after it plunged in April to its lowest level since September.

On the pricing front, a stable 12% of firms raised average selling prices and a lessened 21% of firms planned to raise them in the future. A higher 15% planned to increase worker compensation, the most early 2008.

The most important problems faced by small business were taxes (25%), government requirements (20%), poor sales (12%), quality of labor (10%), insurance cost & availability (9%), competition from large businesses (8%), cost of labor (4%), inflation (4%) and financial & interest rates (3%).

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 May Apr Mar May'13 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 96.6 95.2 93.4 94.4 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (Net %) 15 10 12 8 4 2 3
Firms Expecting Economy To Improve (Net %) 0 -9 -18 -5 -15 -9 -9
Firms Planning to Increase Employment (Net %) 10 8 5 5 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (Net %) 46 41 41 38 39 35 32
Firms Reporting That Credit Was Harder To Get (Net %) 6 5 8 5 6 8 10
Firms Raising Average Selling Prices (Net %) 12 12 9 2 2 4 5
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