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Economy in Brief

U.S. Small Business Optimism Remains Strong
by Tom Moeller  September 12, 2017

The National Federation of Independent Business reported that its Small Business Optimism Index improved to 105.3 during August following  a 1.6 point July jump to 105.2. The latest level was the highest since February, up 11.5% y/y.

Twenty-seven percent of firms reported that now was a good time to expand the business, the most since December 2004. A similar 27% percent of respondents expected higher real sales, the highest level since January. A steady 37% of firms reported that they were expecting the economy to improve. That remained down significantly, however, from the December high of 50%.

Thirty-two percent of firms were planning to make capital outlays in the next 3-to-6 months, the most since October 2006. A lessened two percent of firms planned to raise inventories, though that remained up from none in 2016.

On the labor front, an easier 18% planned to raise employment. Finding employees remained difficult. Fifty-two percent of firms indicated they had few or no qualified candidates to fill job openings, equaling the most since December 1999. Twenty-eight percent of firms raised worker compensation. That's below a high of 30% in January, but up from 24% three months ago. A lessened 15% of firms planned to raise compensation in the next three months, the least since November.

As for inflation, a higher nine percent of firms actually raised average selling prices last month, the most in three years. The percentage of firms planning to raise average selling prices eased m/m to 20%, though that was up from 15% twelve months earlier.

A lessened 20% of firms indicated that taxes were the single most important problem. A sharply higher 19% felt challenged by the quality of labor, up from the four percent low in 2010. A steady 16% reported that government requirements were the largest single problem. A higher 11% of firms reported insurance cost & availability as the largest hurdle. A low eight percent of firms indicated that poor sales were the largest single problem, and a steady eight percent reported competition from large businesses as the largest problem. Seven percent felt that cost of labor was the largest single problem, up from three percent in in 2012. Inflation was reported as the largest problem by a diminished one 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.

National Federation of Independent Business (SA, Net % of Firms) Aug Jul Jun Aug'16 2016 2015 2014
Small Business Optimism Index (1986=100) 105.3 105.2 103.6 94.4 95.3 96.1 95.6
Firms Expecting Economy To Improve 37 37 33 -12 -5 -5 -5
Firms Expecting Higher Real Sales 27 22 17 -1 5 8 11
Firms Reporting Now is a Good Time To Expand the Business 27 23 21 9 10 12 10
Firms Planning to Increase Employment 18 19 15 9 11 12 10
Firms With Few or No Qualified Applicants For Job Openings (%) 52 52 46 48 46 46 43
Firms Reporting That Credit Was Harder To Get 3 3 3 4 5 4 6
Firms Raising Average Selling Prices 9 8 1 3 0 2 8
Firms Raising Worker Compensation 28 27 24 24 24 23 21
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