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Economy in Brief

U.S. Small Business Optimism Nears Record High
by Tom Moeller  August 14, 2018

The National Federation of Independent Business (NFIB) indicated that its Small Business Optimism Index rose to 107.9 during July and recouped its unrevised decline to 107.2 during June. It remained close to the 1983 record high.

An improved 32% of firms indicated that now was a good time to expand the business. A higher thirty-five of firms expected the economy to improve, though that was down from the December 2016 high of 50%. An improved 29% of firms were expecting higher real sales, and that remained up versus 22% twelve months earlier. Thirty percent of firms planned to make capital expenditures, up from 28% during all of last year.

The labor market remained strong. Twenty-three percent of businesses were planning to increase employment. That was near the record high and up from 19% twelve months earlier. Meanwhile, a near-record 55% indicated that there were few or no qualified candidates for job openings, up from the December 2009 low of 21%.

Pricing pressure remained strong. A net 16% of firms were raising average selling prices, up slightly m/m and double the percentage twelve months earlier. A steady 24% of firms were planning to raise prices, remaining near the ten-year high. Thirty-two percent of firms increased worker compensation, up from 27% during all of last year and a higher 22% of businesses were planning to raise compensation.

Credit was readily available. Only four percent of businesses reported difficulties in obtaining credit, up from two percent in June but still near the lowest level of the economic expansion.

This survey inquires about problems facing small business. The most pressing problem in July continued to be labor quality as a near-record 23% reported problems. A higher seven 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. Seventeen percent indicated that taxes were the largest problem, down from a December 2014 high of 27%. Competition from large businesses held at nine percent and insurance costs/availability worried a steady 10%. Poor sales remained at an expansion low of 7% while financial & interest rate problems remained a negligible problem for just two percent of respondents. Price inflation held steady as two percent reported it as the biggest problem.

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) Jul Jun May Jul'17 2017 2016 2015
Small Business Optimism Index (1986=100) 107.9 107.2 107.8 105.2 104.9 95.3 96.1
Firms Expecting Economy to Improve 35 33 37 37 39 -5 -5
Firms Expecting Higher Real Sales 29 26 31 22 23 5 8
Firms Reporting Now Is a Good Time to Expand the Business 32 29 34 23 23 10 12
Firms Planning to Increase Employment 23 20 18 19 18 11 12
Firms With Few or No Qualified Applicants for Job Openings (%) 52 55 48 52 49 46 46
Firms Reporting That Credit Was Harder to Get 4 2 5 3 4 5 4
Firms Raising Average Selling Prices 16 14 19 8 7 0 2
Firms Raising Worker Compensation 32 31 35 27l 27 24 23
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