Small Business Optimism Index soars

A monthly measure of optimism among small business owners has climbed to its second highest level on more upbeat expectations for improving sales and economic conditions.

The National Federation of Independent Business reported its Small Business Optimism Index rose three points to 107.8 in May. The reading is the second highest in the 45-year history of the index.

“Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes,” said Juanita Duggan, president and chief executive officer of the NFIB. “For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase.”

Bill Dunkelberg, chief economist of the NFIB, agreed. “Small business owners are continuing an 18-month streak of unprecedented optimism, which is leading to more hiring and rising wages. While they continue to face challenges in hiring qualified workers, they now have more resources to commit to attracting candidates.”

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 Small Business Optimism Index increased, while one declined and one remained unchanged.

The share of owners responding to the survey upon which the May index was based who said they expect increasing sales rose 10 points to a net 31 percent.

The proportion of business owners who said they expect economic conditions to improve rose seven points to a net 37 percent.

A net 30 percent of owners reported plans for capital outlays in coming months, up a point.
A net 34 percent of owners said they consider now a good time to expand, up seven points.

A net 18 percent of owners reported plans to increase staffing, up two points. A net 33 percent of owners reported unfilled job openings, down two points.

Meanwhile, 23 percent of owners cited finding qualified workers as their single most important business problem, ahead of taxes and regulations. But 35 percent of owners reported increasing compensation to attract applications, the highest level in the history of the index.

A net 3 percent of owners reported higher earnings, an increase of four points to the highest reading ever.

A net 4 percent of owners reported plans to increase inventories, up three points. But at a net negative 4 percent, more owners indicated existing inventories were too high rather than too low.