Small Business Optimism Index remains at 12-year high

Juanita Duggan
Juanita Duggan

A monthly measure of optimism among small business owners continues to increase, suggesting a post-election surge could have staying power.

The National Federation of Independent Business reported that its Small Business Optimism Index edged up a tenth of a point to 105.9 in January. That adds to a gain of 7.4 in December, the largest monthly increase in the history of the index. The index now stands at its highest level since December 2004.

“The stunning climb in optimism after the election was significantly improved in December and confirmed in January. Small business owners like what they see so far from Washington,” said Juanita Duggan, president and chief executive officer of the NFIB.

William Dunkelberg
William Dunkelberg

Bill Dunkelberg, chief economist for the NFIB, said the more upbeat outlook among small business owners signals economic growth. “The very positive expectations that we see in our data have already begun translsting into hiring and spending in the small business sector.”

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 January, five of 10 components of the index advanced and five retreated.

The proportion of small business owners responding to the survey upon which the January index was based who expect the economy to improve fell two points to a net 48 percent. That follows a 38-point increase the month before.

A net 27 percent of owners reported plans to increase capital outlays over the next three months, down two points. But a net 25 percent of owners said they consider now a good time to expand, up two points.

A net 18 percent of owners reported plans to increase staffing, up two points. A net 31 percent of owners reported hard-to-fill job openings also up two points.

The share of owners reporting plans to increase inventories fell two points to a net 2 percent. The portion of those who said existing inventories are too low fell two points to a net negative 5 percent.

A net 29 percent of owners said they expect higher sales, down two points. The share of owners reporting higher earnings rose two points. But at a negative 12 percent, more owners reported lower earnings than higher earnings.

Dunkelberg said that overall, the survey results reflect expectations among small business owners that policies under a new presidential administration and Congress will spur growth. “Now it’s up to the president and Congress to follow through. Our data will quickly reveal whether small business loses faith.”