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Economy in Brief
U.S. Housing Affordability Declines Further in June
The NAR Fixed Rate Mortgage Housing Affordability Index fell 3.6% in June...
EMU Output Makes Solid Gain in June
The European Monetary Union posted a 0.7% increase for industrial output in June...
U.S. Producer Prices Fall During July; Core Increase Weakens
The Producer Price Index for Final Demand fell 0.5% during July...
U.S. Unemployment Claims Continue on an Uptrend
Initial claims for unemployment insurance filed in the week ended August 6 rose 14,000 to 262,000...
RICS Survey Points to More U.K. Housing Sector Weakness
The survey of housing market conditions in the U.K. continues to show strength in prices versus weakness...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Gerald D. Cohen April 10, 2018
The National Federation of Independent Business (NFIB) indicated that its Small Business Optimism Index for March fell 2.7% to 104.7 (unchanged from a year ago). The level of optimism hit a 35-year high in February and the March reading is in line with levels we saw most of last year.
A net 32% of firms expected the economy to improve, down from February's 43% reading and below the 2017 average of 39%. Twenty percent of firms were expecting higher real sales versus 28% last month. Twenty percent of businesses were planning to increase employment, up from February's 18% reading, which was also the 2017 average. Meanwhile, 47% indicated that there were few or no qualified candidates for job openings an unchanged reading from February and somewhat below the 50 level in 2017Q4.
Pricing pressure continues to pick up with a cycle-high net 16% of firms raising average selling prices, up from 13% in February. Twenty-five percent of firms are planning to raise prices also a cycle-high. Last year 21% of small businesses planned on raising prices.
While broader measures of wage growth continue to be tepid, the NFIB survey suggests small businesses continue to raise wages. A net 33% of firms increased worker compensation, the most since 2000 and up from 27% during all of last year. However, the share of businesses planning to raise compensation declined for the second consecutive month to 19%.
Finding the financial resources to expand business remained relatively easy as just a net four percent of businesses reported difficulties in obtaining credit. However, six percent of firms expected credit conditions to tighten, its highest level in 15 months.
This survey inquires about problems facing small business. The most pressing problem in March continues to be labor quality (21% of firms, down from the 20 year high of 22% in February). Despite this, only eight percent of firms reported the cost of labor as the most significant problem. Government requirements became less worrisome at 14%. Taxes continued it precipitous decline with only 13% of firms highlighting this issue, it's lowest reading since 1982. Poor sales remained unchanged at 11%, while competition from large businesses edged up to 11% from 10%. Insurance costs/availability, financial & interest rates, and inflation were all below 10%. Interestingly the 'other' category, which captures issues not described above, doubled to 10% its highest reading in over a year.
Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The index is based 1986=100. 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 (SA, Net % of Firms) | Mar | Feb | Jan | Mar'17 | 2017 | 2016 | 2015 |
---|---|---|---|---|---|---|---|
Small Business Optimism Index (1986=100) | 104.7 | 107.6 | 106.9 | 104.7 | 104.9 | 95.3 | 96.1 |
Firms Expecting Economy to Improve | 32 | 43 | 41 | 46 | 39 | -5 | -5 |
Firms Expecting Higher Real Sales | 20 | 28 | 25 | 18 | 23 | 5 | 8 |
Firms Reporting Now Is a Good Time to Expand the Business | 28 | 32 | 32 | 22 | 23 | 10 | 12 |
Firms Planning to Increase Employment | 20 | 18 | 20 | 16 | 18 | 11 | 12 |
Firms With Few or No Qualified Applicants for Job Openings (%) | 47 | 47 | 49 | 45 | 49 | 46 | 46 |
Firms Reporting That Credit Was Harder to Get | 4 | 3 | 3 | 3 | 4 | 5 | 4 |
Firms Raising Average Selling Prices | 16 | 13 | 11 | 5 | 7 | 0 | 2 |
Firms Raising Worker Compensation | 33 | 31 | 31 | 28 | 27 | 24 | 23 |