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Economy in Brief

U.S. Small Business Optimism Strengthens Modestly; Pricing Power Deteriorates
by Tom Moeller  September 9, 2014

The National Federation of Independent Business reported that its Small Business Optimism Index gained to 96.1 during August following an unrevised moderate July increase. The latest level remained near its highest since September 2007, just before the recession began.

Improvement was evident in most component series including the percentage of firms expecting the economy to improve. The percentage planning to make capital expenditures in the next 3 to 6 months also gained to its highest level since late 2007. The percentage with position they were unable to fill right now also returned to its 2007 high.

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 Aug Jul Jun Aug'13 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 96.1 95.7 95.0 94.1 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (Net %) 6 10 11 5 4 2 3
Firms Expecting Economy To Improve (Net %) -3 -6 -10 -2 -15 -9 -9
Firms Planning to Increase Employment (Net %) 10 13 12 10 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (Net %) 46 42 43 42 39 35 32
Firms Reporting That Credit Was Harder To Get (Net %) 5 5 6 6 6 8 10
Firms Raising Average Selling Prices (Net %) 6 14 14 2 2 4 5
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