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Economy in Brief

U.S. Small Business Optimism Holds Steady
by Tom Moeller  March 10, 2015

The National Federation of Independent Business reported a February reading of 98.0 for its Small Business Optimism Index versus an unrevised 97.9 during January. The figure remained near its highest level since February 2007.

Movement in the component series was mixed last month. The percentage expecting the economy to improve dropped sharply to 12%, down from the December high of 15%. The percentage of firms expecting higher real sales slipped to 15 and was off the high of 20% three months ago. Also falling to 12% was the percentage planning to increase employment, down from the December high of 15%. Counterbalancing these declines was a rise in the percentage indicating few or no qualified applicants for job positions to 47%, the highest point since September 2007. The percent with positions not able to be filled right now rose to an eight-year high of 29%.

The percentage of companies indicating that now was a good time to expand the business held at a lessened 13%. The percentage indicating that credit was harder to get returned to 3%, its least since September 2006. The percentage planning to add to inventories neared its recent high and the percentage planning capital expenditures in the next 3-6 months held steady near its expansion high.

On the pricing front, no firms were raising average selling prices last month, the least since December 2013. The percentage planning price increases held steady at 19%, continuing its sideways trend. Labor's pricing power eased as the percentage of firms raising worker compensation dropped to 20%, the lowest level since October. The percentage planning to raise compensation edged up to 14%, near the middle of the last year's range.

The most important problems faced by small business were government requirements (21%), taxes (20%), quality of labor (14%), poor sales (12%), insurance & availability (9%), competition from large businesses (8%), cost of labor (6%), financial & interest rates (3%) and inflation (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 Feb Jan Dec Feb'14 2014 2013 2012
Small Business Optimism Index (SA, 1986=100) 98.0 97.9 100.4 91.4 95.6 92.4 92.2
Firms Expecting Higher Real Sales In Six Months (SA, Net %) 15 16 20 3 11 4 2
Firms Expecting Economy To Improve (SA, Net %) -1 0 12 -19 -5 -15 -9
Firms Planning to Increase Employment (SA, Net %) 12 14 15 7 10 6 4
Firms With Few or No Qualified Applicants For Job Openings (SA, %) 47 42 43 40 43 39 35
Firms Reporting That Credit Was Harder To Get (SA, Net %) 3 4 3 8 6 6 8
Firms Raising Average Selling Prices (SA, Net %) 0 3 4 1 8 2 4
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