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Economy in Brief

U.S. Small Businesses Optimism Is Little Changed; Prices Ease
by Tom Moeller  May 8, 2018

The National Federation of Independent Business (NFIB) indicated that its Small Business Optimism Index stood at 104.8 for April, 104.7 in March and was fairly stable y/y. The level of optimism hit a 35-year high in February.

A net 30% of firms expected the economy to improve, down from February's 43% reading and below the 2017 average of 39%. Twenty-one percent of firms were expecting higher real sales versus 20% in March. A lessened 16% of businesses were planning to increase employment, the lowest figure since June. Meanwhile, an increased 50% indicated that there were few or no qualified candidates for job openings, the highest level since December.

Pricing pressure eased as a net 14% of firms were raising average selling prices, down from 16% in March. Twenty-two percent of firms were planning to raise prices, the least since December. A stable net 33% of firms increased worker compensation, but the figure was increased from 27% during all of last year. The share of businesses planning to raise compensation improved slightly to 21%, following declines in the prior two months from 24% in January.

Finding the financial resources to expand business remained relatively easy. A net five percent of businesses reported difficulties in obtaining credit, up from three percent during the first quarter and the highest since September.

This survey inquires about problems facing small business. The most pressing problem in April continued to be labor quality as 22% indicated a problem, up from four percent in 2010. Seven percent of firms reported the cost of labor as the most significant problem. Government requirements became much less worrisome at 13%, down from 22% in 2015. A still-low 18% indicated that taxes were the largest problem, though that was up from 13% in March. Competition from large businesses remained high at 10%, and insurance costs/availability worried a lessened 10%. Poor sales declined to an expansion low of 8% while financial & interest rates (2%) and inflation (1%) remained negligible. 

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The index is based 1986=100. 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) Apr Mar Feb Apr'17 2017 2016 2015
Small Business Optimism Index (1986=100) 104.8 104.7 107.6 104.5 104.9 95.3 96.1
Firms Expecting Economy to Improve 30 32 43 38 39 -5 -5
Firms Expecting Higher Real Sales 21 20 28 20 23 5 8
Firms Reporting Now Is a Good Time to Expand the Business 27 28 32 24 23 10 12
Firms Planning to Increase Employment 16 20 18 16 18 11 12
Firms With Few or No Qualified Applicants for Job Openings (%) 50 47 47 48 49 46 46
Firms Reporting That Credit Was Harder to Get 5 4 3 4 4 5 4
Firms Raising Average Selling Prices 14 16 13 7 7 0 2
Firms Raising Worker Compensation 33 33 31 26 27 24 23
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