Has Small Business Turned The Corner?

The latest findings from the National Federation of Independent Businesses (NFIB) and NFIB Small Business Economic Trends Report just so happened to be released during this year’s Small Business Week. And, the reports have put a small on a lot of small business faces

The National Federation of Independent Business’s small business optimism index rose 1.8 points to 95.2, reflecting the modest performance of the economy. This is the first time since October 2007 that the index passed the 95 mark. Small business owners seem a tiny bit more optimistic, but apprehension remains.

“The Index is still 5 points below the average reading from 1973 to 2008, and far from what is considered expansion levels. This reading can only be characterized as a high end recession reading,” said NFIB chief economist Bill Dunkelberg. “Small business confidence rising is always a good thing, but it’s tough to be excited by meager growth in an otherwise tepid economy”.

The survey took from a sample of 10,799 small business owners/members and 1,699 unusable responses were received.

The report covered updates in the following areas

Labor Market – NFIB found employment increased by an average of 0.07 workers per firm, weaker than the increase in March. However this is the seventh positive month in a row and the best string of increases since 2006.

Job Creation – 24% of all owners reported job openings that they couldn’t fill in the current period, suggesting that unemployment may ease. Fourteen percent of owners reported using temporary workers. The recent negative trend in job creation was revered and rose 3 percentage points to a seasonally adjusted net 8 percent.

Sales – The percentage of owners reporting higher nominal sales in the past three months compared to the prior three months improved. Fifteen percent of owners cite weak sales as their top problem, this number is high, but approaching levels experienced in more “normal” times. The pace of inventory reduction was steady and owners are satisfying orders with existing inventory but not ordering new stock. The sales are still historically weak and most likely not enough to produce a substantial reduction in inventories. Expected real sales volumes posted a 2 point decline after a strong 9 point gain in March. Still the third highest reading since 2012.

Capital Spending – Fifty-seven percent of owners reported outlays, up 1 point. Eight percent of owners saw the current period as a good time to expand facilities. Of those who saw it as a bad time (50 percent), 26 percent blamed Washington and the political environment.

Inflation – Twelve percent of owners were raising their selling prices, up 3 points after an 8 point rise in March. Twenty-five percent plan on raising average prices in the next few months.

Profits and Wages – Earnings trends improved 4 points to a net negative 20 percent, the best reading since 2007. Twenty-three percent of owners reported raising compensation and 14 percent plan to raise compensation in the coming months. These numbers are now firmly in the normal range of an economy with solid growth.

Credit Markets – Thirty percent reported that all of their credit needs were met, 5 percent said that their credit needs were not met and 53 percent explicitly said they didn’t want a loan. Thirty percent of all owners reported on borrowing on a regular basis, and 5 percent of the regular borrowers reported that it was harder to get a loan than on their last attempt. This is a 3 point improvement.

The NFIB also reported the largest concerns of small business owners, with taxes and government regulation topping the list, but down slightly from this same time last year.