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Economy in Brief

U.S. Small Business Optimism Recovers Modestly
by Tom Moeller  May 12, 2015

The National Federation of Independent Business reported that its Small Business Optimism Index improved to 96.9 during April, making up most of its decline to an unrevised 95.2 in March. The figure remained down from the December high of 100.4.

Movement in the component series was mixed last month. The percentage of firms expecting higher real sales declined to 10 and was down from the December high of 20%. The percentage expecting the economy to improve remained low at -6%, down from the November high of +13%. Gaining slightly to 11% was the percentage planning to increase employment. That remained below, however, December's high of 15%. The percentage indicating few or no qualified applicants for job positions rose m/m to 44%, remaining below February's reading of 47%. The percent with positions not able to be filled right now reversed three months of increase and improved to 27%, still below February's high of 29%.

The percentage of companies indicating that now was a good time to expand the business remained low at 10%, the least since August. The percentage indicating that credit was harder to get slipped to 4%, down from the 2009 high of 16%. The percentage planning to add to inventories remained negative for a second straight month while the percentage planning capital expenditures in the next 3-6 months improved m/m to 26%. Nevertheless, it remained below December's recovery high of 29%.

On the pricing front, a steady 2% of firms were raising average selling prices last month. The percentage planning price increases, however, ticked higher to 17%. Labor's pricing power improved slightly as the percentage of firms raising worker compensation gained to 23%, up from none early in the recovery. The percentage planning to raise compensation also edged higher m/m to 14%, up from none at the end of the recession.

The most important problems faced by small business were government requirements (23%), taxes (22%), quality of labor (12%), poor sales (11%), insurance cost & availability (8%), competition from large businesses (7%), cost of labor (6%), inflation (3%) 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 Apr Mar Feb  Apr '14 2014 2013 2012
Small Business Optimism Index (SA, 1986=100) 96.9 95.2 98.0 95.2 95.6 92.4 92.2
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 10 13 15 10 11 4 2
Firms Expecting Economy To Improve (SA, Net %) -6 -7 -1 -9 -5 -15 -9
Firms Planning to Increase Employment (SA, Net %) 11 10 12 8 10 6 4
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 44 42 47 41 43 39 35
Firms Reporting That Credit Was Harder To Get (SA, Net %) 4 5 3 5 6 6 8
Firms Raising Average Selling Prices (SA, Net %) 2 2 0 12 8 2 4
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