Small business index moves higher, but still reflects concerns

William Dunkelberg
William Dunkelberg

A monthly measure of optimism among small business owners has increased, but still reflects concerns over the economy and difficulty filling job openings.

The National Federation of Independent Business reported that its Small Business Optimism Index rose a point to 93.6 in April. The index remains below its historical average of 98, though.

“Despite a gain in NFIB’s optimism reading, small business owners remain extremely pessimistic about the economy, and rightfully so,” said Bill Dunkelberg, chief economist for the NFIB.

“It was a relief to see the index turn up, ending a long string of declines,” Dunkelberg added. “However, it’s still down from December 2014, when the index hit an expansion high of 100.”

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them business owners. For April, five of 10 components of the index advanced, while four components remain unchanged and one retreated.

The portion of small business owners responding to the survey upon which the April index was based who expect the economy to improve slipped a point. At a net negative 18 percent, more owners anticipate worsening rather than improving conditions.

The share of owners planning to increase capital outlays over the next three months held steady at 25 percent. A net 8 percent of owners said they consider now a good time to expand, up two points.

A net 11 percent of owners said they plan to increase staffing, up two points. Meanwhile, 29 percent of owners reported hard-to-fill job openings, up four points.

Dunkelberg said those numbers indicator labor markets are tightening, and owners can’t find qualified workers to hire.

The proportion of owners who said they expect higher sales remained unchanged at a net 1 percent.

The share of owners planning to increase inventories rose two points to a net 0 percent. The proportion of owners who consider current inventories too low held steady at a net negative 5 percent.

The share of owners reporting higher earnings increased three points. But at a net negative 19 percent, more owners reported profits were lower quarter to quarter than higher.

Asked to identify their most pressing business problems, owners most frequently cited taxes, followed by government regulations and red tape, quality of labor and poor sales.

Dunkelberg said the University of Michigan Consumer Sentiment Index has declined, offering little hope to small business owners consumer spending will increase.

“Overall, there is no exuberance to be found in the economy, and small business will just continue to plod along,” he said.