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Economy in Brief

U.S. Small Business Optimism Deteriorates to 15-Month Low
by Tom Moeller  July 14, 2015

The National Federation of Independent Business reported that its Small Business Optimism Index declined sharply to 94.1 during June after an unrevised rise to 98.3 in May. The reading was the lowest since March of last year.

The percentage of firms expecting the economy to improve dropped sharply to -9, down from the November high of +13%. The percentage of firms expecting higher real sales in six months (4%) also was the lowest level since early last year, down from December's high of 20%. Just 9% of firms were looking to increase employment, a nine month low. Discouragement about the labor supply continued as the percent with positions not able to be filled right now eased to 24%, the low end of its recent range. The percentage with few or no qualified applicants for job positions eased m/m to 44%. The percentage indicating now was a good time to expand the business dropped sharply to the 9% low of last August.

The percentage indicating that credit was harder to get backed up m/m to 4% but remained down from the 2009 high of 16%. The percentage planning capital expenditures in the next 3 to 6 months dropped to 23%, its lowest level in twelve months.

On the pricing front, a roughly stable 5% of firms were raising average selling prices last month, the most since October. The percentage planning price increases, however, edged up to 18%. Labor's pricing power fell as the percentage of firms raising worker compensation retreated to 21% after three months of increase. The percentage planning to raise compensation fell sharply to 11%, the least since January 2014.

The most important problems faced by small business were taxes (23%), government requirements (20%), quality of labor (12%), poor sales (10%), insurance cost & availability (8%), competition from large businesses (8%), cost of labor (5%), inflation (4%) 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 Jun May Apr  Jun '14 2014 2013 2012
Small Business Optimism Index (SA, 1986=100) 94.1 98.3 96.9 95.0 95.6 92.4 92.2
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 4 7 10 11 11 4 2
Firms Expecting Economy To Improve (SA, Net %) -9 -3 -6 -10 -5 -15 -9
Firms Planning to Increase Employment (SA, Net %) 9 12 11 12 10 6 4
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 44 47 44 43 43 39 35
Firms Reporting That Credit Was Harder To Get (SA, Net %) 4 3 4 6 6 6 8
Firms Raising Average Selling Prices (SA, Net %) 5 6 2 14 8 2 4
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