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Economy in Brief

U.S. Small Business Optimism Meanders Near Recent High
by Tom Moeller  November 11, 2014

The National Federation of Independent Business reported that its Small Business Optimism Index for October recovered to 96.1 following an unrevised decline to 95.3 during September. The latest level remained near highs of the last six months.

Improvement in the component series versus September included the percentage of firms expecting higher real sales and the percentage planning to increase employment. The percentage reporting that now was a good time to expand the business, however, fell back after its September surge. Labor market conditions remained tight. The percentage indicating few or no qualified applicants for job positions neared its cycle high.

A lessened percentage of companies indicated that now was a good time to expand the business following a September jump. The percentage indicating that credit was harder to get fell sharply and equaled the lowest level since 2006. The percentage planning to add to inventories equaled its April high.

On the pricing front, the percentage of firms raising prices recovered moderately following declines during the prior two months. Looking ahead, the percentage planning price increases also improved. Labor's pricing power firmed somewhat. The percentage of firms raising worker compensation ticked higher m/m but remained near the lowest level since February. The percentage planning to raise compensation fell sharply to the lowest level since June.

The most important problems faced by small business were government requirements (22%), taxes (21%), poor sales (12%), quality of labor (11%), insurance cost & availability (8%), competition from large businesses (8%), cost of labor (5%), inflation (4%) and financial & interest rates (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.

National Federation of Independent Business Oct Sep Aug Oct'13 2013 2012 2011
Small Business Optimism Index (SA, 1986=100) 96.1 95.3 96.1 91.6 92.4 92.2 91.4
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 9 5 6 2 4 2 3
Firms Expecting Economy To Improve (SA, Net %) -3 -2 -3 -17 -15 -9 -9
Firms Planning to Increase Employment (SA, Net %) 10 9 10 5 6 4 3
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 45 42 46 40 39 35 32
Firms Reporting That Credit Was Harder To Get (SA, Net %) 4 7 5 6 6 8 10
Firms Raising Average Selling Prices (SA, Net %) 8 4 6 5 2 4 5
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