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by Tom Moeller February 14, 2017
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.
|National Federation of Independent Business (SA, Net %)||Jan||Dec||Nov||Jan'16||2016||2015||2014|
|Small Business Optimism Index (1986=100)||105.9||105.8||98.4||93.9||95.3||96.1||95.6|
|Firms Expecting Economy To Improve||48||50||12||-21||-5||-5||-5|
|Firms Expecting Higher Real Sales||29||31||11||3||5||8||11|
|Firms Reporting Now is a Good Time To Expand the Business (% of Firms)||25||23||11||10||10||12||10|
|Firms Planning to Increase Employment||18||16||15||11||11||12||10|
|Firms With Few or No Qualified Applicants For Job Openings||47||44||52||45||46||46||43|
|Firms Reporting That Credit Was Harder To Get||5||6||4||5||5||4||6|
|Firms Raising Average Selling Prices||5||6||5||-4||0||2||8|
|Firms Raising Worker Compensation||30||26||21||27||24||23||21|