Small business optimism index rebounds to one-year high

William Dunkelberg

A monthly measure of confidence among small business owners has rebounded to its highest level in a year, but not yet enough to reflect strong growth for the sector.

“Small business confidence rising is always a good thing. But it’s tough to be excited about meager growth in an otherwise tepid economy,” said Bill Dunkelberg, chief economist for the National Federation of Independent Business.

The NFIB reported that its Index of Small Business Optimism climbed 2.3 points to 94.4 in May. With gains in each of the last two months, the reading is the highest since May 2012 and the second highest since the recession started in December 2007.

Still, the small business half of gross domestic product isn’t generating growth beyond that for population gains, Dunkelberg said.

More businesses are being formed than closed, but many existing firms have yet to replace staffing reduced during the recession, he added.

“It’s nice to see confidence not shrinking. But there isn’t much to hang your hat on in this report. We are back to where we were in May 2012. Two months don’t make a trend, but we can’t have a trend without them, so it’s a start,” Dunkelberg said.

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group.

For May, eight of 10 components of the index advanced, reflecting a more upbeat outlook for business conditions and sales. But the reading for job growth stalled after five months of gains.

The proportion of small business owners who responded to the survey upon which the May index was based who expect business conditions to improve over the next six months jumped 10 points, but remained at a net negative 5 percent with more pessimistic than positive responses.

The share of owners planning capital outlays over the next three to six months held steady at 23 percent. Meanwhile, 8 percent of owners said now is a good time to expand, up four points.

A net 3 percent of owners plan to increase inventories, up three points.

The proportion of owners who expect higher sales volumes rose four points to 8 percent. While sales expectations are trending higher, they remain historically weak.

The share of owners who expect higher earnings edged up a point, but remained at a net negative 22 percent A net 5 percent of owners plan to increase staffing in coming months, down a point. Meanwhile, 19 percent of owners reported hard-to-fill job openings, up a point.

Asked to identify their most pressing business problems, 24 percent of owners cited taxes, 23 percent regulations, 16 percent weak sales and 2 percent financing and access to credit. 

The Business Times has served as the definitive source for Grand Junction business news since 1994. The journal offers news, views and advice you can use twice each month in print with daily updates online at www.TheBusinessTimes.com
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