U.S. Small Business Optimism Remains Firm

The National Federation of Independent Business reported that its Small Business Optimism Index eased to 104.5 during April from 104.7 in March. The index remained up 11.6% from the level of 93.6 April 2016.

A lessened 38% of firms reported that they were expecting the economy to improve, down sharply from the December high of 50%. Offsetting this was an improved 20% of respondents expected higher real sales while a greater 24% of firms reported that now was a good time to expand the business, the most since early-2005. An improved 20% of firms expected higher real sales in six months, down from the February high of 26%.

On the labor front, a stable 16% planned to increase employment. Finding employees was difficult as a higher 48% of firms indicated they had few or no qualified candidates to fill job openings, up from 46% last April. A somewhat lessened 26% percent of firms had to raise worker compensation, up from 21% in November. A stable 18% of firms planned to raise compensation in the next three months.

A lessened 27% of firms were planning to make capital outlays in the next 3-to-6 months, down slightly from the expansion high of 29%. Three percent were planning to raise inventories, up from zero last April.

On the inflation front, an increased seven percent of firms actually raised average selling prices last month, up from the one percent that lowered prices last April. A greatly lessened 18% of businesses were planning to raise average selling prices, the least in six months.

A fairly stable 21% of firms indicated that taxes were the single most important problem. Seventeen percent reported that government requirements were the largest single problem, down from 20% last April. Sixteen percent felt challenged by the quality of labor, up from the four percent low in 2010 and a reduced 10% of firms indicated that poor sales were the largest single problem. A fairly stable 9% of firms reported insurance cost & availability as the largest hurdle, but an elevated 9% reported competition from large businesses as the largest problem, the most of the expansion. A stable 6% felt that cost of labor was the largest single problem. Inflation was reported as the largest problem by a minimally increased two percent of respondents.

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.