Small Business Optimism Looking Up

WASHINGTON – A soft national economy and rising unemployment rates haven’t dampened small businesses’ optimism about future business conditions. Results of a survey recently conducted by the National Federation of Independent Businesses show small business optimism has hit its highest reading so far this year. NFIB’s Index of Small Business Optimism was up 1.6 points in June to 101.7. Small business owners expressed optimism that the economy would improve, that their own sales would improve, and that now is a good time to expand. Fewer small businesses, however, are enthusiastic with spending What’s necessary to make economic growth a reality, and only a moderate number plan to increase, capital spending, and inventories. The percent of owners who expect the economy will be better in six months increased nine points to 48%. That ties the highest reading since NFIB began the monthly surveys in 1986. NFIB Chief Economist and author of the survey, William Dunkelberg said “the Index component has reliably anticipated every period of growth since the 1974-1975 recession period. It is certainly sending a strong signal now.” One indication of small businesses’ optimism about the economy is their hiring plans – 10% said they plan to increase employment. In addition, the number of firms claiming a hard-to-fill job opening rose a point, indicating that the shrinking of their workforce may be slowing. Employee compensation pressures also eased, with a net 16% of small business employers raising average worker compensation. Credit markets continued to be friendly to small businesses, with only a net 5% reporting more difficulty borrowing. Only 2% said that credit was their most important problem. Credit was also cheap – the average interest rate paid fell to 6%, the lowest since NFIB added this question to the survey in 1980. “The proportion of small business owners expecting improvement in the economy has reached record levels for our monthly surveys, starting in 1986, and is exhibiting a pattern that has reliably preceded every expansion period since 1973. Every economic episode has its unique characteristics, but this indicator appears to be quite reliable. If so, the economy is about to pick up its growth pace. The tax cuts, the Fed action, and the stock market are all fueling optimism, but this has yet to be translated into increased spending and hiring,” said Dunkelberg. -