U.S. Small Business Optimism Is Little Changed

The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index of 101.8 during March was basically unchanged from February, but remained down sharply from its August peak of 108.8. The index gained 0.1% m/m but was 2.8% lower y/y.

A steady 11% of respondents expected the economy to improve, down from a high of 48% in January 2017. Twenty-three percent of firms thought that now was a good time to expand the business. It was 34% in August of last year. A higher 19% expected higher real sales, up m/m but still below a 29% high two years earlier. A steady 27% of firms expected to make capital outlays but that remained below the high of 33% last August.

Pricing power eased m/m. A greatly lessened 24% of firms were planning to raise prices, down from November's ten-year high of 29%. Current pricing pressure also eased. A net 12% of firms were raising average selling prices, the least since January of last year and below the 19% high last May.

Labor market readings improved m/m. The 18% of respondents planning to increase employment was improved m/m, but remained below the record 26% in August. A greatly increased 54% were finding few or no qualified candidates for job openings, up from 47% twelve months earlier.

Pressure to raise worker compensation rebounded m/m as a higher 20% of firms were planning to raise compensation and an increased 33% were doing so now. Both figures remained down sharply, however, versus last year's highs.

Credit remained more difficult to get as a steady six percent reported trouble obtaining financing, the most since September 2017.

The small business survey inquires about an array of issues facing small business. A lessened 21% reported problems with the quality of labor, down m/m but still higher than 18% during all of 2017. A steady 15% indicated that taxes were the largest problem, but that was down from a December 2014 high of 27%. Government requirements were worrisome to a sharply higher 15% of respondents. A lessened eight percent of firms reported the cost of labor as the most significant problem. Poor sales increased to 10% percent as the biggest problem, double the percentage in September. Competition from large businesses fell to nine percent as the biggest problem. Insurance costs/availability worried a still low nine percent of respondents. A steady two percent reported inflation as the biggest problem. Financial & interest rate problems worried only one percent of respondents.

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.