The National Federation of Independent Business reported that its Small Business Optimism Index ticked 0.1% higher during January (12.8% y/y) to 105.9 following a 7.5% December surge. It was the strongest level of optimism since December 2004.

Forty-eight percent of firms reported they were expecting the economy to improve, nearly the most since March 2002. Also 29% of firms expected higher real sales in six months, up from 1% in October. A stronger 25% of firms reported that now was a good time to expand the business, the most since December 2004.

On the labor front, a stronger 18% planned to increase employment. Potential employees seemed harder to come by as 47% of firms indicated they had few or no qualified candidates to fill job openings, up from 46% during all of 2015 and 2016. Hiring difficulty caused an increased 30% percent of firms to raise worker compensation, the most since February of 2007. A diminished 18%, however, of firms planned to raise compensation in the next three months.

A slightly lessened 27% of firms were planning to make capital outlays in the next 3-to-6 months. Two percent were planning to raise inventories, up from zero last year.

On the price inflation front, a still high 21% of businesses were planning to raise average selling prices. Five percent of firms actually raised average selling prices last month, versus none in 2016.

A stable 21% of firms indicated that taxes were the single most important problem and a steady 19% reported that government requirements were the largest single problem. A higher 15% felt challenged by the quality of labor, while a lessened 10% of firms indicated that poor sales were the largest single problem. A stable 8% of firms reported insurance cost & availability as the largest hurdle. A slightly reduced 8% reported competition from large businesses as the largest problem. A much higher 7% felt that cost of labor was their largest single problem. Inflation as the largest problem was indicated by a stable 2% 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.