U.S. Small Business Optimism Strengthens

The National Federation of Independent Business reported that its Small Business Optimism Index increased 0.1% during July to 94.6 following an unrevised 0.7% June rise. Despite the gain, optimism remained down 1.1% versus last July.

An improved -5% of firms were expecting the economy to improve, the best reading in twelve months. A lessened 1% were expecting higher real sales in six months. A reduced 25% were planning to raise capital expenditures. A steady eight percent reported that now was a good time to expand the business, but that was down from 15% in December 2014.

Employment prospects were mixed. Twelve percent of firms expected to increase employment, up slightly m/m. A lessened 46% of respondents found few or no qualified candidates to fill job openings while a reduced 26% of firms had positions they were not able to fill right now, equaling the most of the economic expansion. Twenty-four percent of firms raised worker compensation over the last three months, steady with the first half, while 15% were expecting to raise it in the next three months, steady with Q1.

Small businesses' pricing ability declined as 2% of firms were lowering prices, a reversal after increases in the last two months. Expectations about the future ability to raise prices also eased as 14 percent of firms planned to raise prices, the least since February.

Credit became slightly easier to get as a lessened 4% reported trouble, the least in six months. A lessened 30% of firms felt satisfied that their borrowing needs had been filled in the last three months.

An increased 22% reported that government requirements were the largest single problem. A lower 20% of firms indicated that taxes were the single most important problem, the least since November. A lower 14% felt challenged by the quality of labor, and an increased 12% of firms indicated that poor sales were the largest single problem. A higher eight percent reported insurance cost & availability as the largest hurdle, and a lower seven percent reported competition from large businesses as the largest problem, the least this year. A stable six percent reported the cost of labor was the biggest problem. Inflation was indicated by two percent of respondents as the largest problem, down from four percent in four percent in May.

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.