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Small business optimism perks up strong US economy

The small business optimism index rose to its highest level since December following a strong first-quarter for the U.S. economy.

© Provided by 24/7 Wall Street, LLC

By Paul Ausick, 24/7 Wall St.

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index increased from 101.8 in March to 103.5 in April. Last August, the index reading of 108.8 was the highest in the 45-year history of the index. The consensus estimate from economists had called for the March index to rise to 102.4.

The percentage of business owners who now expect the economy to improve in the next few months rose two points to 13% in April. The percentage who expect sales to rise over the same period added a point to come in at 20%. A year ago, nearly a third of business owners (30%) expected the economy to improve and 21% were expecting better sales.

Some 34% of small business owners reported raising employees' pay in the past three months. That’s up a point on a seasonally adjusted basis compared with March. Since December, net compensation projections are down four points to 20%, unchanged month over month.

The four "hard" measures of the index posted mixed results last month. The month-over-month job creation component rose two points to 18%, the job openings component rose by two points to 25%, capital spending plans remained unchanged at 27% and plans to increase inventory investment rose three points to 2%.

NFIB President and CEO Juanita Duggan commented: "America’s small and independent businesses are rebounding from the first quarter 'shut down, slow down' and don’t appear to be looking back. April’s Index is further evidence that when certainty and stability increase, so do optimism and action. The continued economic boom is thanks, in a major way, to strong growth in the small business half of the economy."

NFIB Chief Economist Bill Dunkelberg added, "The 'real' economy is doing very well versus what we see in financial market volatility. Many jobs were created, and GDP produced with no substantive inflation pressure. The pace of economic growth has accelerated, and consumers and small businesses are an important part of the improvement in sales."

While April was a good month for new job creation in the U.S. economy as a whole, the recent flare-up of trade disputes with China is bringing nearer the addition of U.S. tariffs on all goods imported from China. If that happens, U.S. consumers are virtually certain to see an immediate impact on the costs of many consumer goods that have so far dodged the tariffs on Chinese exports. There is a strong case to be made, though, that the damage from the U.S.-China trade war will fall more heavily on China.

Some 38% of business owners reported job openings they couldn't fill, down by one point month over month. Nearly half (49%) reported few or no qualified applicants for available jobs, five points lower compared to March's report. Nearly a quarter (24%) of business owners said finding qualified workers remains their single most important business problem. Taxes and government regulations were each named by 16% and 15%, respectively, of business owners as their single most important problem.

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Finance Magazine: Small business optimism perks up strong US economy
Small business optimism perks up strong US economy
The small business optimism index rose to its highest level since December following a strong first-quarter for the U.S. economy.
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