Small business optimism index up, but outlook still mixed

A monthly measure of optimism among small business owners has climbed to its second-highest level in nearly seven years, but still reflects more cautious and uncertain outlooks than  upbeat expectations.

“Expectations are still glum, although improving grudgingly,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business.

The NFIB reported that its Small Business Optimism Index rose four-tenths of a point to 96.1. That’s the second highest reading since October 2007, yet still below the historical average of 100 for the index posted between 1973 and 2008.

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

“More owners still think business conditions will be worse in six months than think they will be better,” Dunkelberg said. “Few see the current period as a good time to expand.”

“There is so much noise and uncertainty in the economic system that small business owners are finding it difficult to be optimistic in this environment. Overall, small business is still not in a good place,” he added.

For August, six of 10 components of the index advanced, while three components retreated and one remained unchanged.

The proportion of small business owners responding to the survey upon which the August index was based who expect the economy to improve rose three points from July. But at a net negative 3 percent, there still were more pessimistic than optimistic responses.

A net 27 percent of owners said they plan to make capital outlays, up four points from July. A net 9 percent of owners said they consider now a good time to expand, down a point.

The share of owners who said they plan to increase staffing fell three points to a net 10 percent, a leading indicator of what could be weaker job growth ahead. A net 26 percent of owners reported hard-to-fill job openings, up two points.

The proportion of owners who expect increased sales declined four points to a net 6 percent. Meanwhile, 13 percent of owners cited weak sales as their most pressing business problem, one of the lowest readings since December 2007.

The share of owners who plan to increase inventories edged up a point to a net 1 percent. A net negative 2 percent of owners said they considered their current inventories too low.

Reports of positive earnings trends rose a point to a net negative 17 percent, one of the highest readings since 2007.