Tuesday, June 10, 2014

Small Business Optimism Grew in May

The NFIB’s Small Business Optimism index rose to 96.6, a 1.4 point gain and the second consecutive month the index is above pre-recession levels. However the index is still below historical averages. Expectations about sales and business conditions contributed to the gain.

NFIB chief economist Bill Dunkelberg pointed out that, “The four components most closely related to GDP and employment growth (job openings, job creation plans, inventory and capital spending plans) collectively fell 1 point in May. So the entire gain in optimism was driven by soft components such as expectations about sales and business conditions.”

Financing continues to remain the least cited problem for small businesses in April, although it rose to 3% of respondents reporting it as their single most important problem. Loan availability is often seen as a leading indicator of business investment, hiring and economic growth. Taxes along with government requirements and red tape continue to be the most cited problems for small businesses, with 25% and 20% of respondents reporting it as their top problems respectively.

The report was positive given the optimistic future outlook of small businesses. Small businesses on net saw a 9% increase in their expectations of the economy to improve.

Finding qualified applicants is a persistent problem for small businesses. A net 24% have positions they are not able to fill, unchanged from the previous month and a high since at least the recession. Due to the quality of labor shortage coupled with plans to increase compensation, upward pressure is placed on wage inflation, which is poised to rise.

Read the NFIB report.

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