Despite a slight drop off in December, small business confidence was at its highest ever in 2017. The Small Business Optimism Index from the National Federation of Independent Business (NFIB) dipped 2.6 points to 104.9 last month.
“2017 was the most remarkable year in the 45-year history of the NFIB Optimism Index,” said Juanita Duggan, NFIB president and CEO, in a release. The average monthly index level was 104.8, breaking the previous record of 104.6 set in 2004.
The strong optimism can be linked to politics. “With a massive tax cut this year, accompanied by significant regulatory relief, we expect very strong growth, millions more jobs, and higher pay for Americans,” said Duggan.
“Small business owners were waiting for better policies from Washington, suddenly they got them, and the engine of the economy roared back to life,” added NFIB Chief Economist Bill Dunkelberg.
Half of the 10 components declined in December, while two grew and three were constant. Expected better business conditions and inventory plans were among those to decline. Actual sales saw a 14-point upward swing last month. Wells Fargo Securities expects businesses to expand following the tax reform.
The overarching issue of a labor shortage is still at the forefront for small businesses as it is in the construction industry. “There’s a critical shortage of qualified workers and it’s becoming a real cost driver for small businesses,” said Dunkelberg. Businesses are forced to raise wages to attract and keep workers, but that’s a positive for the economy, he concluded.
-Michael Miller, associate editor