Small business index rises on upbeat expectations

William Dunkelberg
William Dunkelberg

A monthly measure of confidence among small business owners has moved closer to its historical average on more upbeat expectations for an improving economy and increased sales.

The National Federation of Independent Business reported that its Small Business Optimism Index rose two points to 98.1 in November. That’s the highest reading since February 2007. The average reading for the index over the past 40 years is 98, although the index averaged 100 before the Great Recession.

“It’s a little early to declare a breakout. This performance will have to be consolidated by several more positive readings before owners are confident to hire more employees and expand their businesses. But it’s a good sign that comes at a good time for small business,” said Bill Dunkelberg, chief economist of the NFIB.

The NFIB bases the index on the results of monthly surveys of small business owners who belong to the advocacy group.

For November, four of 10 components of the index advanced, while three retreated and three remained unchanged.

The proportion of small business owners responding to the survey upon which the November index was based who expect the economy to improve over the next six months surged 16 points to a net 13 percent. That’s the highest reading since November 2010.

Dunkelberg said the big gain could be attributed in part to reaction to the results of the general election. The share of owners who said they don’t think the economy will improve and blamed the political climate fell from 28 percent to 19 percent, the lowest level since January 2012.

The share of owners who said they plan to make capital outlays over the next three to six months slipped a point to a net 25 percent. The proportion of owners who said they consider now a good time to expand remained unchanged at a net 11 percent.

A net 11 percent of owners said they plan to increase staffing, up a point from October. Meanwhile, a net 24 percent of owners reported hard-to-fill job openings, unchanged.

The share of owners who plan to increase inventories edged down a point to a net 2 percent.

The proportion of owners who expect increased sales advanced another five points in November to a net 14 percent. Just 12 percent of owners cited weak sales as their most pressing business problem, unchanged from October and one of the lowest levels since December 2007. Taxes and government regulations were the most cited problems at 23 percent and 22 percent, respectively.

Reports of positive earnings trends increased three points, but remained at a net negative 17 percent