Small Business Optimism Index holds steady

William Dunkelberg

A measure of optimism among small business owners remains unchanged on a mix of positive and negative expectations for the months ahead.

The National Federation of Independent Business reported its Small Business Optimism Index held steady at 104 in October. The latest reading remains slightly higher than the historical average of 100 for the 46-year-old index.

“Leading up to the presidential election, small businesses continued to focus on stabilizing their businesses, but were uncertain about the future economic conditions due to COVID-19 government regulations on all levels,” said Bill Dunkelberg, chief economist of the NFIB. “We see solid momentum going into the fourth quarter, and another good quarter could get the GDP back to its 2019 closing levels.”

The results of the survey were collected before the election, and there could be uncertainty moving forward related to election results, the spread of the coronavirus pandemic and possible government-mandated shutdowns.

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 October, four of 10 components of the index advanced, five retreated and one remained unchanged.

The proportion of those responding to the survey upon which the index was based who reported higher earnings over the past three months rose nine points from September. But at a net negative 3 percent, more owners still reported lower than higher earnings. Among those reporting higher profits, 70 percent cited increased sales. Among those reporting lower profits, 52 percent blamed decreased sales and 7 percent labor costs.

Since June, the component tracking earnings trends has rebounded 32 points.

A net 11 percent of respondents expect higher sales, up three points.

A net 12 percent plan to increase inventories, up a point to a record high. A net 4 percent said current inventories were too low, down a point.

A net 27 percent of respondents said they expect the economy to improve over the next six months, down five points.

A net 27 percent reported plans for capital outlays, down a point. A net 13 percent said they consider now a good time to expand, unchanged.

A net 18 percent of respondents reported plans to increase staffing, down five points. A net 33 percent reported at least one unfilled job opening, down three points.

At the same time, 22 percent cited finding qualified labor as their single most important business problem, ahead of taxes, government regulations and poor sales. In the construction sector, 35 percent of respondents said finding qualified workers was the top concern.