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Economy in Brief

U.S. Small Business Optimism Surges
by Tom Moeller  January 13, 2015

The National Federation of Independent Business reported that its Small Business Optimism Index for December jumped to 100.4 following an unrevised gain to 98.1 during November. The latest level was the highest since October 2006. For all of last year, the index rose to 95.6, its highest point also since 2006.

Improvement in the component series was greatest in the percentage of firms expecting higher real sales. Also continuing to strengthen was the percentage planning to increase employment. It rose to its highest level since August 2007 but the percentage indicating few or no qualified applicants for job positions rose slightly to near the cycle high.

The percentage of companies indicated that now was a good time to expand the business jumped to its highest since July 2007 as the percentage indicating that credit was harder to get fell to the lowest level since September 2006. The percentage planning to add to inventories surged to an eight year high and the percentage planning capital expenditures jumped to the highest point since late 2007.

On the pricing front, the percentage of firms raising prices remained at the lowest level in nine months. The percentage planning price increases rebounded to the highest level since July. Labor's pricing power strengthened. The percentage of firms raising worker compensation gained to its highest point since early 2008. The percentage planning to raise compensation jumped to the 2007 high.

The most important problems faced by small business were taxes (27%), government requirements (22%), poor sales (11%), quality of labor (11%), competition from large businesses (8%), insurance cost & availability (8%), cost of labor (4%), inflation (3%) 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 Dec Nov Oct Dec'13 2014 2013 2012
Small Business Optimism Index (SA, 1986=100) 100.4 98.1 96.1 93.9 95.6 92.4 92.2
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 20 14 9 8 11 4 2
Firms Expecting Economy To Improve (SA, Net %) 12 13 -3 -11 -5 -15 -9
Firms Planning to Increase Employment (SA, Net %) 15 11 10 8 10 6 4
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 43 45 45 38 43 39 35
Firms Reporting That Credit Was Harder To Get (SA, Net %) 3 5 4 7 6 6 8
Firms Raising Average Selling Prices (SA, Net %) 4 4 8 -1 8 2 4
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