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Small Business Optimism Improves Slightly

By | 05.20.14

Small Business Optimism Improves Slightly

The NFIB Research Foundation, which has collected data on small business economic trends for decades from its membership database, just issued a report on a survey conducted in April 2014. For this survey, a sampling of 10,799 small-business owners and members was drawn; 1,699 usable responses were received, representing a 16 percent response rate.

Small Business Optimism

The survey revealed that, the “Small Business Optimism Index” increased by 1.8 points, representing a post-recession high of 95.2 and surpassing the 95 marker for the first time in six years. In fact, seven out of ten indices improved. The key reason for this improved index is credited with expected business conditions.

According to Bill Dunkelberg, NFIB Chief Economist, “April’s Index did pass the 95 mark that seemed to block any progress in optimism for the past five years…. This reading can only be characterized as a high-end recession reading.”

Labor Markets

Employment increased by about 0.07, per firm, in April. Although slightly lower than March, this represented the seventh positive month in a row, as well as the best series of gains in seven years. According to respondents, 51 percent either hired or attempted to hire in the prior three months.

Inventories and Sales

Inventory reduction remained steady and sales trends saw improvement. A strong reading for expected real sales contributed to a need for rebuilding with respondents indicating that they plan on adding to inventory. Respondents also reported increased nominal sales in the prior three months and 15 percent cited weak sales as their key business issue. High, but approaching levels experienced in “normal” times represented the best seasonally adjusted reading since early 2012 and the third highest reading since early that year.

Capital Spending

Fifty-seven percent of the respondents reported outlays; 25 percent plan capital outlays in the next three-to-six months. Eight percent feel that the current environment is a good time to expand. This figure remains unchanged. Also, about 50 percent indicated that they felt this is a bad time to expand, with 25 percent blaming the political environment.

Inflation

The net percent of owners raising selling prices increased to 12 percent.

Profits and Earnings

Earnings trends improved to the best reading since 2007 and reported compensation gains are strongly in the range seen in an economy experiencing solid growth.

Credit Markets

A small percentage—5 percent—of respondents reported that all of their credit need were not met; 30 percent indicated that all of their credit needs were met; and 53 percent strongly indicated that they did not want a loan. Borrowing was slightly down and regular borrowing dipped slightly. Business owners remain concerned about taxes, regulations, and health care costs.

Source:

NFIB.com; May 2014 Report:
Small Business Optimism Improves, But Don’t Get Too Excited.

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