Small Business Optimism Improves in October

November 8, 2016 by Paul Ausick

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for October rose 0.8 point from 94.1 in September to come in at 94.9. The October reading remains well below the index’s 42-year average of 98.

The four “hard” measures of the index posted mixed results last month. The job creation component remained flat in October at 10%, the job openings component rose four points to 28, capital spending plans remained flat at 27% and inventory investment plans rose nine points to 2% from a −7% in September.

Some 25% of small business owners reported raising employees’ pay in the past three months. That’s up three points on a seasonally adjusted basis from the September total. Some 19% are planning to raise wages in the next three months, up five points month over month.

In his comments on the report, NFIB chief economist Bill Dunkelberg noted:

The first guess at GDP growth for Q3 was 2.9 percent, a marked improvement over the prior four quarters. But prospects for the fourth quarter are not promising, auto sales are weakening, housing supply is constrained, inventories are still a bit excessive, and consumer sentiment has been declining. Businesses are not inclined to be investing in new plant and equipment, not knowing where already high marginal tax rates might go.

The NFIB reports that 28% of business owners currently have positions open that they are unable to fill (up four percentage points from September) and that 48% said there were few or no qualified applicants for the open positions, unchanged from the prior month’s total.

Business owners said their single most important problem is either taxes (21%) or government regulations and red tape (21%). Quality of labor (15%) was the third most-cited problem. The least important problems are financing and interest rates (2%) and inflation (1%).

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