Small Business Optimism Index rises

William Dunkelberg

A monthly measure of optimism among small business owners has climbed to one of its highest levels on more upbeat expectations for sales and earnings.

“2020 is off to an explosive start for the small business economy, with owners expecting increased sales, earnings and higher wages for employees,” said William Dunkelberg, chief economist of the National Federation of Independent Business.

The NFIB reported its Small Business Optimism Index rose 1.4 points to 104.3 in January. That ranks in the top 10 percent of all readings in the 46-year history of the index.

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

For January, six of 10 components of the index advanced, while two retreated and two remained unchanged from December.

The proportion of those responding to the survey upon which the January index was based who expect higher sales rose seven points to a net 23 percent.

The proportion of those reporting higher earnings rose five points, erasing half of a 10-point drop in December. But at a net negative 3 percent, more owners still reported lower earnings than higher earnings.

The share of those who said they expect the economy to improve fell two points to a net 14 percent.

A net 28 percent of survey respondents reported plans to make capital outlays, unchanged. A net 28 percent of respondents said they consider now a good time to expand, up five points.

A net 19 percent of respondents reported plans to increase staffing, unchanged. A net 37 percent reported hard-to-fill job openings, up four points. Asked to identify their single most important business problem, 26 percent cited finding qualified workers. That’s a point below the record high in August.

“Finding qualified labor continues to eclipse taxes or regulations as a top business problem,” Dunkelberg said. “Small business owners will likely continue offering improved compensation to attract and retain qualified workers in this highly competitive labor market.”

A net 4 percent of respondents reported plans to increase inventories, up a point. But at a net negative 3 percent, more respondents reported current inventories as too high than too low.