Small business optimism index up slightly

A monthly measure of optimism among small business owners has edged up on improving expectations for the economy, capital layouts and hiring.

Readings for inventories and sales slipped, however, as the overall index remained below is historical average.

The National Federation of Independent Business reported that its Small Business Optimism Index climbed to 95.7 in July. The reading was seven-tenths of a point higher than the month before, but still below the average reading of 100 posted between 1973 and 2008. The index is based on the results of monthly surveys of members of the small business advocacy group.

For July, six of 10 components of the index advanced, while three components retreated and one held steady.

“One the positive side, expectations for business conditions and the outlook for expansion accounted for virtually all of the net gain in July’s index,” said Bill Dunkelberg, chief economist for the NFIB. “However, capital spending reports continue to remain mediocre, spending plans are weak and inventories are too large, with more owners reporting sales trends deteriorating than improving. As long as these stats continue to hold, the small business half of the economy will continue to not be able to pull its weight.”

The proportion of small business owners responding to the survey upon which the July index was based who expect the economy to improve rose four points. But at a net negative 6 percent,  there were more pessimistic than optimistic responses.

A net 23 percent of owners said they plan to make capital outlays, up a point from June. A net 10 percent of owners said they consider now a good time to expand, up three points.

The share of owners who said they plan to increase staffing climbed a point to a net 13 percent, the highest level since September 2007. A net 24 percent of owners reported hard-to-fill job openings,  down two points.

The proportion of owners who expect increased sales fell a point to a net 10 percent. Just 13 percent of owners cited weak sales as their most pressing business challenge, one of the lowest reading since December 2007.

The share of owners who plan to increase inventories rose a point, but remained at a net 0 percent. A net negative 3 percent of owners said they considered their current inventories too low, down a point.

Reports of positive earnings trends remained unchanged at a net negative 18 percent.