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Small Business Optimism Index Remain at Historic Levels in October

November 19, 2018, 06:55 AM
Filed Under: Economy

Small business optimism continued its two-year streak of record highs, according to the NFIB Small Business Optimism Index October reading of 107.4. Overall, small businesses continue to support the three percent-plus growth of the economy and add significant numbers of new workers to the employment pool. Owners believe the current period is a good time to expand substantially, are planning to invest in more inventory, and are reporting high sales figures.

“For two years, small business owners have expressed record levels of optimism and are proving to be a driving force in this rapidly growing economy,” said NFIB President and CEO Juanita D. Duggan. “The October optimism index further validates that when small businesses get tax relief and are freed from regulatory shackles, they thrive and the whole economy prospers.”

Seasonally adjusted, 30 percent of owners think the current period is a good time to expand substantially, citing the economy (72 percent) and strong sales (14 percent). Nine percent of those who believe it is a good time to expand cited the political climate with 17 percent who believe it is a “bad time” to expand blaming politics. Although politics matter, the index indicates that economic factors, good or bad, are the main drivers of expansion decisions.

The net percent of owners planning to invest in more inventory rose two points to a net five percent, the 21st positive month since January 2017. This is due to the owners viewing current inventory stocks as “too low” falling to a net negative two percent, historically a very “tight” condition. A net eight percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, unchanged from September.

“Thanks to a number of factors, including the federal government’s loosening grip on the private sector, the U.S. regained the top spot in the World Economic Forum’s ranking as the most competitive country during the month of October. An unburdened small business sector is truly great for employment and the general economy,” said NFIB Chief Economist Bill Dunkelberg. “October’s report sets the stage for solid economic and employment growth in the fourth quarter, while inflation and interest rates remain historically tame. Small businesses are moving the economy forward.”

Job creation remained solid in October for small businesses at a net addition of 0.15 workers per firm, as reported in last week’s NFIB monthly jobs report. However, 38 percent of all owners reported job openings they could not fill in the current period, equaling September’s record high. Sixty percent of owners reported hiring or trying to hire with 88 percent of them reporting few or no qualified applicants for the positions they were trying to fill. Thirty-four percent reported raising overall compensation in hopes of hiring and retaining needed employees, only three points off from September’s record high.

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