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Economy in Brief

U.S. Small Business Optimism Improves Slightly; Pricing Remains Firm
by Tom Moeller  August 12, 2014

The National Federation of Independent Business reported that its Small Business Optimism Index edged up to 95.7 during July, making up half of its June decline. The latest level remained near its highest since September 2007, just before the recession began.

Improvement was evident in most component series including plans to increase employment, which jumped to the highest level since 1987. Firms with positions unable to fill slipped m/m but also remained near the 1987 high. Expectations for economic improvement and the percentage of firms indicating that now was a good time to expand the business moved higher. Also improving modestly were the percentage of firms planning to raise inventories and planning to make capital expenditures. These latter increases followed sharp declines. To the downside were the readings of the percentage of firms expecting higher real sales in six months and the percentage indicating that inventories were too low.

On the pricing front, the percentage of firms raising prices now remained near the seven year high while the percentage planning future price increases improved slightly. Labor's pricing power also remained firm, especially the percentage of firms planning to raise worker compensation.

The most important problems faced by small business were taxes (22%), government requirements (22%), poor sales (13%), quality of labor (10%), competition from large businesses (9%), insurance cost & availability (8%), cost of labor (5%), 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 Jul Jun May Jul'13 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 95.7 95.0 96.6 94.1 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (Net %) 10 11 15 7 4 2 3
Firms Expecting Economy To Improve (Net %) -6 -10 0 -6 -15 -9 -9
Firms Planning to Increase Employment (Net %) 13 12 10 9 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (Net %) 42 43 46 40 39 35 32
Firms Reporting That Credit Was Harder To Get (Net %) 5 6 6 6 6 8 10
Firms Raising Average Selling Prices (Net %) 14 14 12 4 2 4 5
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