March Small Business Optimism Stalls on Weak Outlook for Economic Growth

The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index ticked up from 101.7 in February to 101.8 in March. Last August the index reading of 108.8 was the highest in the 45-year history of the index. The consensus estimate from economists had called for the March index to remain unchanged.

The percentage of business owners who now expect the economy to improve in the next few months remained unchanged at 11% in March. The percentage who expect sales to rise over the same period added three points to come in at 19%. A year ago, nearly a third of business owners (32%) expected the economy to improve and 20% were expecting better sales.

Some 33% of small business owners reported raising employees’ pay in the past three months. That’s up two points on a seasonally adjusted basis compared with February. Since December, net compensation projections are down four points to 20% following a two-point gain in March.

The four “hard” measures of the index posted mixed results last month. The month-over-month job creation component rose two points to 18%, the job openings component also rose two points to 39%, capital spending plans remained unchanged at 27% and plans to increase inventory investment fell two points to a negative 1%.

NFIB President and CEO Juanita Duggan commented:

Small business owners continue to create jobs, expand their operations, and are enjoying strong sales. Since Congress resolved the shutdown, uncertainty has declined as small business owners add jobs, increase sales, and invest in their businesses and employees.

NFIB Chief Economist Bill Dunkelberg added:

Owners are growing their businesses and expect that they can sell more if they can produce more with additional employees. Investment spending has been solid for the past two years and owners are choosing to invest in their workforce as well by creating new jobs and raising wages.

Some 39% of business owners reported job openings they couldn’t fill, down by two points month over month. More than half (54%) reported few or no qualified applicants for available jobs, up five points compared to February’s report. More than a fifth (21%) of business owners said finding qualified workers remains their single most important business problem. Taxes and government regulations were each named by 15% of business owners as their single most important problem.

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