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Economy in Brief

U.S. Small Business Optimism Weakens
by Tom Moeller  July 11, 2017

The National Federation of Independent Business reported that its Small Business Optimism Index declined to 103.6 during June, the lowest level since November. Nevertheless, the index remained up 9.6% y/y.

A lessened 33% of firms reported that they were expecting the economy to improve, down significantly from the December high of 50%. A lower 17% of respondents expected higher real sales, also down sharply from December's high of 31%. Twenty-one percent of firms reported that now was a good time to expand the business, down from the January high but up from eight percent last June.

On the labor front, 15% planned to increase employment, lower than the record of 18% in May. Finding employees was a little easier as 46% of firms indicated they had few or no qualified candidates to fill job openings, down from November's high of 52%. Twenty-four percent of firms raised worker compensation versus a high of 30% in January. A stable 18% of firms planned to raise compensation in the next three months.

Thirty percent of firms were planning to make capital outlays in the next 3-to-6 months, the most since September 2007. Four percent of firms were planning to raise inventories, up from one percent in May and none in 2016.

On the inflation front, only one percent of firms actually raised average selling prices last month, the least in nine months. The percentage of firms planning to raise average selling prices slipped m/m to 19%, though that remained up from 16% twelve months earlier.

A fairly stable 22% of firms indicated that taxes were the single most important problem. A sharply higher 19% reported that government requirements were the largest single problem. A greatly lessened 15% felt challenged by the quality of labor, but that still was up from the four percent low in 2010. An easier nine percent of firms reported insurance cost & availability as the largest hurdle. A lower ten percent of firms indicated that poor sales were the largest single problem, and eight percent reported competition from large businesses as the largest problem. Seven percent felt that cost of labor was the largest single problem, down from the nine percent August 2016 high but up from a five percent low. Inflation was reported as the largest problem by just one percent 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 %) Jun May Apr Jun'16 2016 2015 2014
Small Business Optimism Index (1986=100) 103.6 104.5 104.5 94.5 95.3 96.1 95.6
Firms Expecting Economy To Improve 33 39 38 -9 -5 -5 -5
Firms Expecting Higher Real Sales 17 22 20 2 5 8 11
Firms Reporting Now is a Good Time To Expand the Business (% of Firms) 21 23 24 8 10 12 10
Firms Planning to Increase Employment 15 18 16 11 11 12 10
Firms With Few or No Qualified Applicants For Job Openings 46 51 48 48 46 46 43
Firms Reporting That Credit Was Harder To Get 3 3 4 5 5 4 6
Firms Raising Average Selling Prices 1 7 7 2 0 2 8
Firms Raising Worker Compensation 24 28 26 22 24 23 21
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