Small business optimism rebounds — a bit

William Dunkelberg
William Dunkelberg

A monthly measure of optimism among small business owners rebounded in July, but not enough to offset a more than four-point drop the month before or claw back to the long-term average.

The National Federation of Independent Business reported that its Small Business Optimism Index rose 1.3 points to 95.4. The index retreated 4.2 points in June and even with the July gain remains well below the long-term average of 98. The index was five points higher in December.

“The best that can be said about the July index is that there was no further decline from June,” said Bill Dunkelberg, chief economist of the NFIB.

The outlook for the second half of 2015 remains “modest,” Dunkelberg said. “The large firm division will be coasting, not growing or investing, and the small business division is not in the mood for rapid expansion and hiring. But even so, the economy grows, driven by population growth and investment to cover depreciation and technological obsolescence, but not a lot more.”

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group. For July, eight of 10 components of the index advanced, with more upbeat expectations for business conditions and sales accounting for more than half the overall gain in the index.

The proportion of small business owners responding to the survey upon which the July index was based who expect the economy to improve jumped five points. But at net negative 4 percent, more owners still anticipate worsening than improving conditions.

The share of owners planning capital outlays over the next three to six months edged up a point to a net 24 percent. The portion of owners who said they consider now a good time to expand increased three points to a net 12 percent.

A net 12 percent of owners reported plans to increase staffing, up three points. A net 25 percent of owners reported hard-to-fill job openings, up a point.

The proportion of owners planning to add to inventories rose four points to exactly balance against the share of owners who said they aren’t. The proportion of owners who said existing inventories were too low declined two points to a net negative
6 percent.

The share of owners who expect higher sales rose two points to a net 6 percent. A net 10 percent of owners cited poor sales as their single most important problem, fourth behind taxes, regulations and labor.

The proportion of owners reporting higher earnings retreated two points to a net negative 19 percent.