Small Business Optimism Reaches ‘Normal’ Level

The National Federation of Independent Businesses’ (NFIB) Small Business Optimism Index reached its highest level this year, but it still remains below December’s level. The survey increased 1.4 points to 98.3 with six of the 10 index components increasing.

“Overall, the index remained in a holding pattern, a few points below the prerecession average, although at the 42-year average, and showing no tendency to ‘break out’ into a stronger pattern of economic growth,” NFIB noted in its report.

“It appears that the small business sector has finally attained a normal level of activity, which will hopefully keep the economy moving forward, even if at a sub-par pace,” said Bill Dunkelberg, NFIB chief economist. “That being said, improved profit trends accounted for over half the index gain, a rather unusual but welcome development. This was supported by positive sales trends and continued, although rising, fuel prices.”

Over the month, the earnings component added nine points, reaching a new cycle high. Sales also rebounded into positive territory for the first time since 2012. Regardless, sales expectations were moderate, NFIB said.

Four percent of owners said their borrowing needs were not satisfied, unchanged and historically low, while 30% stated their credit needs were met and 50% made it clear they didn’t need a loan. “For most of the recession, record numbers of firms have been on the ‘credit sidelines,’ seeing no good reason to borrow,” the May report states. Those stating that financing was their top business problem (2%) remained the same. “In the Great Recession, no more than 5% cited credit availability and interest rates as their top problem compared to a high of 37% in the Volcker era,” NFIB said. “If credit availability is really a problem, owners let it be known. Twenty-nine percent of all owners reported borrowing on a regular basis, down one point.”

While May’s survey results confirm that the economy is moving ahead, it’s occurring “at an uninspiring pace,” Dunkelberg said. “Owners do what is necessary, like hiring workers when needed, to keep up with growth mostly powered by an increasing population.”

- Diana Mota, NACM associate editor


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