Small business optimism index regains lost ground

A monthly measure of optimism among small business owners has increased, but still only matches a level of more than a year ago.

The National Federation of Independent Business reported that its Index of Small Business Optimism advanced two points in April to 94.5. With the gain, the index returns to a reading posted in February 2011.

The index is based on the results of monthly surveys of members of the NFIB, a small business advocacy group based in Washington, D.C.

While the index remains historically weak, there was good news in the details in April, said Bill Dunkelberg, chief economist of the NFIB. “Job creation plans, job openings and capital spending plans all increased. Hopefully, this performance will hold in the coming months.”

Concerns about slow economic growth, a European debt crisis and mounting U.S. deficits persist, however, Dunkelberg said. “Most likely, there will be only small improvements on Main Street in optimism or hiring and spending this year. With the election six months away, the index will signal how small firms see the economy’s future unfolding — and their outlook will be telling.”

For April, six of 10 components of the Index of Small Business Optimism advanced, two components retreated and two remained unchanged.

The proportion of small business owners responding to the survey upon which the April index was based who expect the economy to improve over the next six months rose three points, but remains at a net negative 5 percent.

The share of owners planning staffing increases jumped five points to 5 percent. At the same time, 17 percent of owners reported unfilled job openings, up two points.

The proportion of owners planning capital expenditures over the next three to six months climbed three points to 25 percent, while 7 percent of owners said they consider now a good time to expand.

The share of owners planning to increase inventories remained unchanged at a net 0 percent.

A net 6 percent of owners expect sales volume to increase, down two points, while 19 percent of owners cite weak sales as their top business problem.

Reports of positive earnings trends jumped 11 points, and at a negative 12 percent has climbed to its highest reading since April 2007.

A net 8 percent of small business owners reported raising selling prices, up two points from March and nine points from January.