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Economy in Brief

U.S. Small Business Optimism Slips
by Tom Moeller  July 10, 2018

The National Federation of Independent Business (NFIB) indicated that its Small Business Optimism Index eased to 107.2 during June from 107.8 in May. It remained up sharply from the recent low of 92.6 in March 2016.

A lessened 29% of firms indicated that now was a good time to expand the business. Thirty-three of firms expected the economy to improve, down from the December 2016 high of 50%. A lessened 26% of firms were expecting higher real sales, though that remained up versus 17% twelve months ago. A little-changed 29% of firms planned to make capital expenditures.

Labor market indicators showed strength. Twenty percent of businesses were planning to increase employment, up from 15% twelve months ago. Meanwhile, a record 55% indicated that there were few or no qualified candidates for job openings.

Pricing pressure remained strong. A net 14% of firms were raising average selling prices, down slightly m/m but up from one percent twelve months ago. A slightly lessened 24 percent of firms were planning to raise prices, but that remained near the ten-year high. A fewer 31% of firms increased worker compensation, and a weakened 21% of businesses were planning to raise compensation.

Credit was readily available. A greatly lessened two percent of businesses reported difficulties in obtaining credit, the lowest level of the economic expansion.

This survey inquires about problems facing small business. The most pressing problem in June continued to be labor quality at a high 21%, up from four percent in 2010. Six percent of firms reported the cost of labor as the most significant problem. Government requirements were worrisome to 14% of respondents, down from 22% in 2015. A lessened 14% indicated that taxes were the largest problem, down from a December 2014 high of 27%. Competition from large businesses fell sharply to 9%, and insurance costs/availability worried a slightly increased 11%. Poor sales remained at an expansion low of 8% while financial & interest rate problems (2%) remained negligible. Price inflation problems eased to two percent.

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) Jun May Apr Jun'17 2017 2016 2015
Small Business Optimism Index (1986=100) 107.2 107.8 104.8 103.6 104.9 95.3 96.1
Firms Expecting Economy to Improve 33 37 30 33 39 -5 -5
Firms Expecting Higher Real Sales 26 31 21 17 23 5 8
Firms Reporting Now Is a Good Time to Expand the Business 29 34 27 21 23 10 12
Firms Planning to Increase Employment 20 18 16 15 18 11 12
Firms With Few or No Qualified Applicants for Job Openings (%) 55 48 50 46 49 46 46
Firms Reporting That Credit Was Harder to Get 2 5 5 3 4 5 4
Firms Raising Average Selling Prices 14 19 14 1 7 0 2
Firms Raising Worker Compensation 31 35 33 24 27 24 23
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