Small Business Optimism Soars, Setting New May Records
Small businesses reported increased compensation, profits and sales trends, according to the Small Business Optimism Index published by the National Federation of Independent Business (NFIB). May marked the second highest level in the NFIB survey’s 45-year history. The index rose to 107.8, a three-point gain.
The May report noted several records:
- Compensation increases hit a 45-year high at a record net 35 percent.
- Positive earnings trends reached a survey high at a net three percent.
- Positive sales trends are at the highest level since 1995.
- Expansion plans are the most robust in survey history.
“Main Street optimism is on a stratospheric trajectory thanks to recent tax cuts and regulatory changes,” says NFIB President and CEO Juanita Duggan. “For years, owners have continuously signaled that when taxes and regulations ease, earnings and employee compensation increase.”
In another relevant marker, a net 19 percent of small business owners are planning price increases, the highest since 2008 and a signal of a strong economy. A net three percent reported positive profit trends, up four points and the best reading in the survey’s history. In addition, a net 15 percent reported higher nominal sales in the past three months, up an astonishing seven points and the sixth consecutive strong month for sales.
“Small-business owners are continuing an 18-month streak of unprecedented optimism which is leading to more hiring and raising wages,” says NFIB Chief Economist Bill Dunkelberg. “While they continue to face challenges in hiring qualified workers, they now have more resources to commit to attracting candidates.”
The promotional products industry is comprised almost entirely of small businesses, with 76 percent of suppliers and 96 percent of distributors reporting less than $1 million in annual sales.
Small-business owners continue to hire with a seasonally adjusted net 18 percent planning to create new jobs. Twenty-nine percent of owners have job openings for skilled workers, the third-highest reading since 2000. Twelve percent have job openings for unskilled workers, with the strongest demand in the transportation, travel, communications and utilities sector. To compete in the job market, 35 percent of owners reported increases in labor compensation to attract job applicants.
The percentage of owners reporting capital outlays moved up one point to 62 percent, with 47 percent reporting spending on new equipment, 24 percent acquiring vehicles, and 16 percent improving expanded facilities. Thirty percent plan capital outlays in the next few months.
Access to credit continues as a non-issue with 37 percent of owners reporting all credit needs were satisfied and 43 percent saying they were not interested in a loan, down seven points from last month and the lowest reading since 2007. Only one percent reported that financing was their top business problem. Owners planning to build inventories rose three points to a net four percent, the nineteenth positive reading in the past 20 months.
As reported in NFIB’s May jobs report, 23 percent of owners cited the difficulty of finding qualified workers as their single most important business problem, followed by taxes at 17 percent and regulations at 13 percent. Fifty-eight percent reported hiring or trying to hire, up one point from last month, but 83 percent of those reported few or no qualified workers.
Click here to view the NFIB Small Business Economic Trends Survey.