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Small Business Optimism Improves in September, Uncertainty Index Remains High

October 20, 2020, 07:22 AM
Filed Under: Economy

The NFIB Optimism Index rose 3.8 points to 104.0 in September, a historically high reading. Nine of the 10 Index components improved and one declined. The NFIB Uncertainty Index increased 2 points to 92, up from 75 in April.

“As parts of the country continue to open, small businesses are seeing some improvements in foot traffic and sales,” said NFIB Chief Economist Bill Dunkelberg. “However, some small businesses are still struggling financially to operate at full capacity while navigating state and local regulations and are uncertain about what will happen in the future.”

Other key findings include:

  • Earnings trends over the past 3 months improved 13 points to a net negative 12 percent reporting higher earnings.
  • Owners expecting better business conditions over the next 6 months improved 8 points to a net 32 percent.
  • Real sales expectations in the next 3 months increased 5 points to a net 8 percent.
  • Inventory investment plans over the next 3 to 6 months increased by 5 points to a net 11 percent.
  • The percent of owners thinking it’s a good time to expand increased 1 point to 13 percent.

Included in NFIB’s monthly jobs report, a net 23 percent (seasonally adjusted) of owners plan to create new jobs in the next 3 months, up 2 points from the August report and 22 points above April’s report. However, 36 percent (seasonally adjusted) of all owners reported job openings that they could not fill in the current period.

Fifty-three percent of owners reported capital outlays in the last 6 months, up 6 points from August. Of those making expenditures, 38 percent reported spending on new equipment (up 4 points), 23 percent acquired vehicles (up 2 points), and 16 percent improved or expanded facilities (down 4 points). Four percent acquired a new building or land for expansion (down 2 points) and 8 percent spent money on new fixtures and furniture (down 1 point).

A net negative 6 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, an improvement of 9 points from August but still below pre-crisis levels. The net percent of owners expecting higher real sales volumes increased 5 points to a net 8 percent of owners.

The net percent of owners reporting inventory increases rose 2 points to a net negative 7 percent, showing that more firms are reporting falling inventories than seeing stocks building. The net percent of owners viewing current inventory stocks as “too low” rose 2 points to 5 percent. Owners planning to expand inventory holdings increased 5 points from August to a net 11 percent, the highest reading since November 2004.  

The net percent of owners raising average selling prices rose 12 points to a net 13 percent (seasonally adjusted). Eleven percent of owners reported lower average selling prices and 23 percent reported higher average prices. Price hikes were the most frequent in wholesale (27 percent higher, 10 percent lower) and retail (27 percent higher, 7 percent lower). A net 17 percent (seasonally adjusted) plan price hikes.

A net 23 percent (seasonally adjusted) reported raising compensation, up 5 points from August. A net 16 percent of owners are planning to do so in the next three months. Nine percent of owners cited labor costs as their top business problem.

Twenty-one percent of owners cited “finding qualified labor” as their top business problem. Thirty percent in construction report finding qualified labor as their top issue and slowing new home production.

The frequency of reports of positive profit trends rose 13 points to a net negative 12 percent reporting quarter on quarter profit improvement. Among owners reporting weaker profits, 51 percent blamed weak sales, 9 percent cited lower prices, 6 percent cited usual seasonal change, and 5 percent cited labor costs. For owners reporting higher profits, 73 percent credited sales volumes and 12 percent cited usual seasonal change.

Two percent of employers reported that all their borrowing needs were not satisfied, down one point. Thirty-three percent reported that all credit needs were met (up 2 points) and 55 percent said they were not interested in a loan. A net 2 percent reported their last loan was harder to obtain than in previous attempts. One percent of owners reported that financing was their top business problem. The net percent of owners reporting paying a higher rate on their most recent loan was negative 10 percent. Twenty-six percent of owners reported borrowing on a regular basis.

Click here to view the NFIB Small Business Economic Trends Survey.

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