Optimism among small business owners is surging, according to the National Federation of Independent Business (NFIB), whose Small Business Optimism Index rose 3.7 points in November to 107.5, the highest level since November 2004. The monthly jump in small business sentiment beat analysts' forecasts with 8 out of the 10 components of the index rising, led by a 16-point gain in expected better business conditions to 48 and an increase of 13 points to 34 in sales expectations.
On the small business employment front, job creation plans rose 6 points to 24, and while job openings declined by 5 points to 30, it was still the third most positive among the components. Hiring plans soared in construction, manufacturing and professional services, according to the NFIB.
The net percentage of business owners agreeing that now is a good time expand rose 4 points to 27, while plans to increase capital expenditures fell by 1 point to a still high net 26. Even the inventory picture improved though remaining among the least exuberant components, with inventory plans rising 3 points to 7 and current inventory satisfaction up 3 points to a minus 2. Actual earnings trends as well as easier credit conditions, the two most pesimistic components became slightly less so, rising 2 points to a minus 12 and 1 point to a minus 4, respectively.
The November data shows small business owners exuberant about the economy and expecting growth much more robust than at anytime during the recovery. According to the NFIB, the reading indicates further upticks in the economy, with GDP growth perhaps pushing towards 4 percent in the fourth quarter. The optimism, however, hinges upon the expected solution to what businessmen in the NFIB survey say is the number one problem for small business, taxes, and thus on the passage in Congress of business friendly tax reform.
The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.
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