Small Business Optimism Index edges up

William Dunkelberg

A measure of optimism among small business owners has edged up even as owners contend with the effects of inclement weather and the coronavirus pandemic.

The National Federation of Independent Business reported its Small Business Optimism Index rose eight-tenths to 95.8 in February. The index remains below its 47-year average of 98.

“Small business owners worked hard in February to overcome unexpected weather conditions along with the ongoing COVID-19 pandemic,” said Bill Dunkelberg, chief economist of the NFIB.

“Capital spending has been strong, but not on Main Street. The economic recovery remains uneven for small businesses, especially those still managing state and local regulations and restrictions,” Dunkelberg said. “Congress and the Biden administration must keep small businesses a priority as they plan future policy legislation.”

The NFIB bases the index on monthly surveys of members of the small business advocacy group, most of them small business owners.

For February, five of 10 components of the index advanced, four retreated and one remained unchanged from January.

The proportion of those who responded to the survey upon which the February index was based who expect the economy to improve over the next six months rose four points. But at a net negative 19 percent, more respondents said they expected worsening conditions.

A net 23 percent of those who responded reports plans to make capital outlays, up a point. A net 6 percent said they considered now a good time to expand, down two points.

A net 18 percent of respondents reported plans to increase staffing, up a point. A net 40 percent reported hard-to-fill job openings, up seven points. 

Asked to name their single most important business problem, 24 percent cited the quality of labor, ahead of taxes and regulatory costs.

The share of survey respondents reporting higher earnings rose five points. But at net negative 11 percent, more respondents reported lower than higher earnings. Among those reporting higher profits, 65 percent cited increased sales volume, 17 percent cited seasonal changes and 7 percent cited higher prices.

The proportion of those expecting higher sales over the next three months fell two points to a net negative 8 percent.

A net 2 percent of respondents reported plans to increase inventories, down two points. A net 5 percent said current inventories were too low, unchanged.