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The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index for August rose by 0.9 percentage points from 107.2 in July to come in at 108.8. The is the highest reading in the 45-year history of the index and the highest in 35 years. The consensus estimate from economists had called for the index to increase by 0.2 percentage points to 108.1.

The four “hard” measures of the index posted mixed results last month. The job creation component rose three points month over month in August to 26%, the job openings component increased by a point to 38%, capital spending plans rose three points to 33% and plans to increase inventory investment jumped six points to 10%.

The previous record-high index reading was posted in July 1983 at 108. For 2017 the average monthly index was 104.8, the highest ever. The previous annual record was 104.6 set in 2004.

Some 32% of small business owners reported raising employees’ pay in the past three months. That’s flat on a seasonally adjusted basis compared with the July total, and three points below the record May reading. Since January of 2017, net compensation changes have increased by two percentage points. Some 22% of small business owners are planning to raise wages in the next three months, down one point month over month.

NFIB President and CEO Juanita Duggan commented:

As the tax and regulatory landscape changed, so did small business expectations and plans. 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.

Bill Dunkelberg, NFIB’s chief economist, added:

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. 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.

A record-high 38% of business owners reported job openings they couldn’t fill. More than half (55%) reported few or no qualified applicants for available jobs. A record 25% of business owners said finding qualified workers is their single most important business problem.

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