Small business owners regaining optimism

The latest results of a monthly index tracking optimism among small business owners reflect a more upbeat outlook, although not yet a robust economic recovery.

The National Federation of Independent Business reported that its Index of Small Business Optimism rose four-tenths of a point in February to 94.5.

“This is not a reading that characterizes a strongly rebounding recovery. But it is the third best reading since the fourth quarter of 2009, when the economy was expanding rapidly,” said Bill Dunkelberg, chief economist for the NFIB, a small business advocacy group.

“So, it gives us cause for some real optimism. Apparently the future is looking brighter for a few more small business owners, although much will depend on what Congress does this year,” Dunkelberg said.

Seven components of the index advanced in February, while three fell. Most of the changes — positive and negative — were small. The index is based on the responses of 774 NFIB members selected at random.

A net 9 percent of small business owners responding to the survey expect conditions to improve over the next six months, down a point. The share of owners who plan to make capital outlays in the future held steady at 22 percent, while 7 percent said they consider now a good time to expand.

A seasonally adjusted net 5 percent of owners reported plans to increase staffing over the next three months, up two points from January. Meanwhile 15 percent of owners reported unfilled job openings, also up two points.

A net 8 percent of owners reported paying higher wages. A seasonally adjusted 5 percent plan to raise compensation, up two points to the highest reading since November 2009. As labor markets tighten, compensation rises.

The share of owners reporting higher sales over the past three months remained unchanged at a seasonally adjusted net negative 11 percent. The proportion of owners who expect higher sales rose a point to a net 14 percent.

With more businesses reducing inventories than increasing them, a net negative 2 percent of owners reported plans to add to inventories. That reading is consistent with weak sales trends, but not the improving outlook for increasing sales volumes.

A net 21 percent of owners reported plans to increase prices, the highest reading in 28 months. As the economy improves, more businesses are expected to raise prices.

The proportion of owners reporting positive earnings trends rose a point in February, but remained at a net negative 27 percent with more owners reporting lower earnings quarter on quarter than higher earnings.

 

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