The Small Business Optimism Index as measured by the National Federation of Independent Businesses soared in August to a new record in the survey’s 45-year history. According to the NFIB, the record-breaking figure is driven by the changes in the nation’s economic policies.
The August survey showed:
- Job creation plans and unfilled job openings both set new records.
- The percentage of small business owners saying it is a good time to expand tied the May 2018 all-time high.
- Inventory investment plans were the strongest since 2005 and capital spending plans the highest since 2007.
“Today’s groundbreaking numbers are demonstrative of what I’m hearing every day from small business owners – that business is booming. As the tax and regulatory landscape changed, so did small business expectations and plans,” said NFIB President and CEO Juanita D. Duggan. “We’re now seeing the tangible results of those plans as small businesses report historically high, some record-breaking, levels of increased sales, investment, earnings, and hiring.”
August is the ninth consecutive strong month of reported sales gains after years of low or negative numbers. The net percent of owners planning to build inventories rose six points to a record net 10 percent. The frequency of reports of positive profit trends rose to the second highest reading in the survey’s 45-year history.
“At the beginning of this historic run, Index gains were dominated by expectations: good time to expand, expected real sales, inventory satisfaction, expected credit conditions, and expected business conditions,” said NFIB Chief Economist Bill Dunkelberg.“Now the Index is dominated by real business activity that makes GDP grow: job creation plans, job openings, strong capital spending plans, record inventory investment plans, and earnings. Small business is clearly helping to drive that four percent growth in the domestic economy.”
As reported in last week’s NFIB’s monthly jobs report, 38 percent of owners reported job openings they could not fill in the current period, a survey high. Sixty-two percent of owners reported trying to hire, with 89 percent of those owners reporting few or no qualified applications for their open positions.
A record 25 percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, up two points from last month.
The report concludes, “As a leading indicator of economic activity, the Index turned up sharply late in November 2016 and headed to readings in the top 5 percent of the Index history in December, never looking back. Three months later, economic activity soared, rising from 1.5 percent GDP growth to over 3 percent. Profits are driving the stock indices for ‘small’ firms to record levels, mirroring the record levels of profit gains for NFIB firms.”
# # #
William Bruce is an Accredited Business Intermediary (ABI) and Senior Valuation Analyst (SVA) assisting buyers and sellers of privately held businesses in the transfer of ownership. His practice includes consulting services nationally on issues of business valuation and transfer. He currently serves as president of the American Business Brokers Association. He may be reached at (251) 990-5934 or by email at Will@WilliamBruce.org. His website offering profitable businesses for sale may be viewed at www.WilliamBruce.net.