U.S. Small Business Optimism Index Remains Steady

The National Federation of Independent Business reported that its Small Business Optimism Index remained unchanged during October following a slight uptick in September. The latest figure remained below the high of 100.4 in December. According to the NFIB, the October level also remained below the 42-year average of 98 and was consistent with economic growth of 2.5%.

As for business activity, 11% of firms reported that now was a good time to expand the business, down from 12% in September. The reading remained in the range of the last twelve months. The percentage of firms expecting the economy to improve also held steady m/m and has trended sideways this year. The percentage of firms expecting higher real sales in six months improved m/m but remained down sharply versus last year.

A shortage of labor was in evidence. Forty eight percent found few or no qualified candidates to fill job openings, equaling the eight-year high. A lessened 27% of firms had positions they were not able to fill right now. A smaller 11% of firms expected to increase employment, down from a 15% high at the end of last year. A diminished net 21% of firms raised worker compensation over the last twelve months, but 17% were expecting to raise it in the next three months, the most since December.

Small businesses ability to improve pricing remained limited. Only 2% of firms were raising prices, down from 14% in July of last year. Expectations about the ability to raise prices collapsed. Fourteen percent of firms were planning to raise prices, down from 20% during all of last year.

Credit remained readily available as just 3% reported that it was difficult to get. Thirty percent of firms felt satisfied, however, that their borrowing needs had been filled in the last three months, down from 35% March.

A stable 22% reported government requirements as the largest single problem and 21% were troubled most by taxes, lower than a high of 27% in December. A lessened 13% were challenged by the quality of labor. A slightly increased 12% indicated poor sales as their biggest problem; 7 percent reported competition from large businesses and 8 percent reported insurance cost and availability. A higher 6% reported the cost of labor was a big problem and inflation was indicated by only 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.