Index slips, but small business optimism remains high

William Dunkelberg
William Dunkelberg

An index tracking optimism among small business owners has slipped, but remains at an historically high level.

The National Federation of Independent Business reported that its Small Business Optimism Index declined six-tenths of a point in March. But at 104.7, the index remains near its highest level in more than a decade.

“By historical standards, this is an excellent performance with most of the components holding their gains,” said Bill Dunkelberg, chief economist of the NFIB. “The increases in capital expenditure plans and actual earnings are signs of a healthier economy, and we expect job creation to pick up in future months.”

Juanita Duggan, president and chief executive officer of the NFIB, said a surge in small business optimism that followed the election in November could subside if a new administration and Congress doesn’t reverse what many small business owners consider burdensome policies. “Congress’ failure to keep its promises could dampen optimism, and that would ripple through the economy.”

Juanita Duggan
Juanita Duggan

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners. For March, six of 10 components of the index retreated, two advanced and two held steady.

The proportion of small business owners responding to the survey upon which the March index was based who expect the economy to improve slipped a point to a net 46 percent.

A net 29 percent of owners reported plans to increase capital outlays over the next three months, up three points. Meanwhile, 22 percent of owners said they consider now a good time to expand, unchanged from a month ago.

A net 16 percent of owners reported plans to increase staffing, up a point. A net 30 percent of owners reported hard-to-fill job openings, down two points.

A net 2 percent of owners said they plan to increase inventories, down a point. The portion of those who said inventories are too low fell three points to a net negative 5 percent.

A net 18 percent of owners said they expect higher sales, a decrease of eight points since February and a sign the overall index could moderate, Dunkelberg said.

At a net negative 9 percent, a drop of four points, more owners reported lower earnings than higher earnings.

The NFIB Uncertainty Index, a separate measure of how small business owners view the future, hit 93 in March for the second-highest reading ever.