Small Business Optimism Index rebounds

William Dunkelberg

A monthly measure of optimism among small business owners has rebounded on more upbeat expectations for improving sales and staffing.

The National Federation of Independent Business reported its Small Business Optimism Index rose 4.5 points to 94.4 in May. The index dropped a total of 13.6 points in April and March in the aftermath of the coronavirus pandemic and related restrictions.

Bill Dunkelberg, chief economist of the NFIB, said small business owners are more optimistic about business conditions and expect a recession to be short-lived.

“As states begin to region, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies,” Dunkelberg said. “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to open safely.”

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 May, eight of 10 components of the index advanced.

The portion of those who responded to the survey upon which the May index was based who expect higher sales rose 18 points from a record low in April. But at a net negative 24 percent, more owners still expect lower sales than higher sales.

The proportion of those planning to increase staffing rose seven points to a net 8 percent. A net 23 percent reported hard-to-fill job openings, down a point.

A net 34 percent of respondents expect the economy to improve over the next six months, up five points.

A net 20 percent reported plans to make capital outlays, up two points. A net 5 percent said they consider now a good time to expand, up two points.

A net 2 percent of respondents reported plans to increase inventories, up six points. At a net negative 5 percent, more respondents reported their inventories as too high rather than too low.

The share of those reporting higher earnings fell six points to a net negative 26 percent. Among those reporting weaker profits, 46 percent blamed lower sales.