Indexes reflect improving small business outlook
A monthly index tracking optimism among small business owners continues to edge up on improving expectations for sales and hiring.
A separate quarterly index tracking small business optimism has climbed to its highest level in five years.
The National Federation of Independent Business reported that its Small Business Optimism Index edged up two-tenths of a point to 94.1 in January. The latest level remains well below the average monthly reading of 100 before the recession, however.
The index is based on monthly surveys of members of the small business advocacy group. For January, three of 10 components of the index advanced, five retreated and two remained unchanged.
The share of owners responding to the survey who expect higher sales volume jumped seven points to a net 15 percent. While 14 percent of owners still cited weak sales as their most challenging business problem, that’s the lowest level since June 2008.
The proportion of owners who plan to increase staffing rose four points to a net 12 percent, the highest level since 2007. A net 22 percent of owners reported hard-to-fill job openings, down a point.
At the same time, though, a net negative 11 percent of owners said they expect the economy to improve over the next six months, a reflection of more pessimistic than optimistic responses. The share was unchanged from last month.
A net 24 percent of owners reported plans for capital outlays over the next three to six months, down two points. The share of owners who characterized now as a good time to expand dropped two points to a net 8 percent.
Reports of positive earnings trends dropped five points to a net negative 27 percent.
Meanwhile, the latest results of the quarterly Wells Fargo and Gallop Small Business Index reflect the most optimistic outlook in five years. The overall score for the index jumped to 45 for the first quarter of 2014. That’s the highest reading since the third quarter of 2008, although still well below pre-recession levels.
The index is based on quarterly surveys of small business owners and their assessments of the present situation as well as their expectations in six areas: capital spending, cash flow, credit availability, financial situation, hiring and revenue.
For the first quarter of 2014, the share of owners reporting good cash flow over the past year rose six points to 52 percent, while the proportion of owners who expect good cash flow in 2014 rose five points to 57 percent.
The share of owners who said they expect to increase staffing over the next year rose six points to 22 percent, while the proportion of owners who expect increasing revenues rose four points to 48 percent.
Fewer owners reported difficulty in obtaining credit with a four-point drop to 23 percent.