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Economy in Brief

U.S. Small Business Optimism Jumps to Record High
by Tom Moeller  September 11, 2018

The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index rose to a record high of 108.8 during August. The index level was 3.3% higher than 12 months earlier.

A record 34% of respondents indicated that now was a good time to expand the business. A still-high thirty-four expected the economy to improve and a firm 26% expected higher real sales. A higher 33% planned to make capital expenditures, up from 28% during all of last year.

Labor market readings remained firm. A record 26% of businesses were planning to increase employment. Meanwhile, a higher 55% indicated that there were few or no qualified candidates for job openings.

Pricing pressure remained strong. A net 17% of firms were raising average selling prices in August, roughly double the percentage twelve months earlier. A steady 24% of firms were planning to raise prices, remaining near the ten-year high. Thirty-two percent of firms increased worker compensation, up from one percent during all of 2009. Twenty-one of businesses were planning to raise compensation, up from 15% last August.

Credit was readily available. A slightly higher five percent of businesses reported difficulties in obtaining credit, up from two percent in June. These readings were near the lowest level of the economic expansion.

This survey inquires about problems facing small business. The most pressing problem in August continued to be labor quality as a record 25% reported problems. A higher eight percent of firms reported the cost of labor as the most significant problem. Government requirements were worrisome to a lower 13% of respondents, down from 22% in 2015. Fifteen percent indicated that taxes were the largest problem, down from a December 2014 high of 27%. Competition from large businesses fell to eight percent and insurance costs/availability worried a lessened 9%. Poor sales remained at a near-record low of 7% while financial & interest rate problems remained a negligible problem for just two percent of respondents. Price inflation held steady as two percent reported it as the biggest problem.

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) Aug Jul Jun Aug'17 2017 2016 2015
Small Business Optimism Index (1986=100) 108.8 107.9 107.2 105.3 104.9 95.3 96.1
Firms Expecting Economy to Improve 34 35 33 37 39 -5 -5
Firms Expecting Higher Real Sales 26 29 26 27 23 5 8
Firms Reporting Now Is a Good Time to Expand the Business 34 32 29 27 23 10 12
Firms Planning to Increase Employment 26 23 20 18 18 11 12
Firms With Few or No Qualified Applicants for Job Openings (%) 55 52 55 52 49 46 46
Firms Reporting That Credit Was Harder to Get 5 4 2 3 4 5 4
Firms Raising Average Selling Prices 17 16 14 9 7 0 2
Firms Raising Worker Compensation 32 32 31 28 27 24 23
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