Small Business Optimism Surges

Best Index Since Feb. 2007

Small Business Optimism SurgesU.S. small-business owners are feeling increasingly positive about the economy, according to a new, closely-watched survey. Optimism last month was at the highest level in nearly eight years, with owners anticipating strong sales growth in 2015, data from the National Federation of Independent Business (NFIB) showed. The NFB’s Small Business Optimism index was up 2 points to 98.1, the highest reading since February 2007.

The optimistic NFIB data is in line with positive sentiment in the ad specialty industry. The latest Counselor Confidence Index, a measure of distributor health, was 112 in Q3 – identical to the six-month rolling average and a dozen points above the baseline that indicates industry growth. The majority of industry firms expect both their 2014 and 2015 sales to increase.

Similarly, according to NFIB data, U.S. business owners are bullish about conditions over the next six months, with expectations up sharply. Specifically, expectations for real sales volumes rose 5 percentage points within the survey. Despite the economic goodwill, small-business owners still held back on capital spending and hiring. Bill Dunkelberg, chief economist of the NFIB, says it will take several more positive readings before confidence build enough to translate into more hiring. He added, though, that the November optimism index is “a good sign that comes at a good time for small business.”

While NFIB data showed that small-business owners continue to expect sales growth, they believe it is likely to be achieved through price cuts, with many still cautious about raising prices and reluctant to ramp up inventory accumulation, according to the NFIB survey. Worker compensation was up slightly, with a seasonally-adjusted net 21% of those surveyed reporting higher wages, up 2 points from the previous index. The reported wage gains are in the typical range for an economy with reasonable growth, according to the NFIB. Labor market conditions are expected to tighten, which should put more upward pressure on compensation, the federation reported.

The NFIB Research Foundation has been collecting small business economic trends data through quarterly surveys since 1973 and monthly surveys since 1986. Survey respondents are drawn from the group’s membership.