A monthly measure of optimism among small business owners continues to increase, reflecting more upbeat expectations for not only the economy and sales, but also capital outlays and hiring.
“Small business owners are demonstrating a continued confidence in the strength of the economy and are betting capital spending dollars on it,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business. “This solid investment performance is supporting ongoing improvements in productivity and real wages.”
The NFIB reported its Small Business Optimism Index climbed to 105 in May with gains in six of 10 components of the index. The overall reading has increased 3.2 points over the past two months to move closer to the record-high 108.8 posted in August.
“Optimism among small business owners has surged back to historically high levels thanks to strong hiring, investment and sales,” said Juanita Duggan, president and chief executive officer of the NFIB. “The small business half of the economy is leading the way, taking advantage of lower taxes and fewer regulations and reinvesting in their businesses, their employees and the economy as a whole.”
Tony Gagliardi, director of the NFIB in Colorado, said it’s a good thing state policies don’t drive the economy. “Just when Colorado finally started on its long-overdue journey to simplify and synthesize its sales tax collection system, it then decides to allow every burgh and hamlet the power to set their own minimum wage rates. Swapping one paperwork headache for another makes no sense. Add in various proposals for paid leave, and the economy would look dismal were it not for the federal tax cuts and jobs act, which continues to radiate economic gains.”
The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners.
A net 16 percent of owners who responded to the survey upon which the May index was based expect the economy to improve, up three points from April.
A net 30 percent plan capital outlays in coming months, also up three points. Plans to invest were most frequent for the transportation, manufacturing, professional services and construction sectors.
A net 30 percent of owners said they consider now a good time to expand, up five points.
A net 21 percent of owners plan to increase staffing, up a point. Meanwhile, 38 percent reported hard-to-fill job openings, unchanged from April. While 62 percent of owners said they hired or tried to employees, 54 percent reported few or no qualified applicants.
In addition, 25 percent cited the difficulty of finding qualified workers as their single most important business problem, matching a record high. Taxes placed a distant second, followed by government regulations.
A net 23 percent of owners expect higher sales, up three points. A net 9 percent reported higher sales over the past three months, unchanged from April.
A net 2 percent of owners plan to increase inventories, unchanged from a month ago. But at a net negative 4 percent, more business owners said current inventories are too high than too low.
The portion of owners reporting increased earnings rose two points. But at a net negative 1 percent, more owners still reported lower earnings than higher earnings.