Small Business Optimism Index up for a third straight month

A measure of confidence among small business owners has advanced for a third straight month on growing expectations for improving conditions and sales.

The latest reading remains below the level reported in February, though, as well as average readings before the recession.

“We should be encouraged, but cautiously so,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business.

The NFIB reported that its Small Business Optimism Index rose 1.8 points in November to 92. Even with recent gains, the index remains below the 94.5 reported in February.

The November reading was based on the results of surveys of a random sample of 781 members of the NFIB, a small business advocacy group based in Washington, D.C.

“After so many months of pessimism, November’s modest gain made it feel like spring again,” Dunkelberg said. “We have good reason to be optimistic about last month’s report and hopeful about what it means for the future. Still, our current reality is still very much the ongoing economic winter.”

For November, seven of 10 components of the index increased, including the proportion of owners responding to the surveys who expect improving business conditions in six months. That reading was up four points — but at a net negative 12 percent still 22 points below January.

The share of owners planning capital outlays in the next three to six months rose three points to 24 percent, one of the highest readings in 40 months. Meanwhile, 8 percent of owners characterized now as a good time to expand, just a point below the best reading in 38 months.

A seasonally adjusted net 7 percent of owners reported plans to increase staffing over the next three months, up four points to the strongest reading in 38 months. Still, hiring plans historically increase to double digits during an expansion. At the same time, 16 percent of owners reported unfilled job openings, up two points.

A net 4 percent of owners expect improving sales volumes — a jump of eight points over October, but still nine points below January.

Moreover, 25 percent of owners still cited poor sales as their biggest business problem, followed by taxes and regulations.

With the proportions of business owners planning to increase stocks exactly balanced with owners planning to reduce them, the reading for inventories remained unchanged at a net 0 percent.