The National Federation of Independent Business (NFIB) Tuesday morning reported that its small business optimism index rose from 101.8 in September to 102.4 in October. In August 2018, the NFIB index hit 108.8, the highest level in its 45-year history. The consensus estimate from economists had called for the September index to increase to 102.3.
The percentage of business owners who now expect the economy to improve in the next few months rose by a percentage point to 10% in October (in July this index reading was 20 and in October 2018 the reading was 33). The percentage who expect sales to rise over the same period also rose by one point to come in at 17%.
Some 30% of small business owners reported raising employees’ pay in the past three months. That’s one point more on a seasonally adjusted basis compared with September. The percentage of firms planning to raise net compensation rose by four points to 22%.
The four “hard” measures of the index posted mostly positive results last month. The month-over-month job creation component increased by a point to 18%, the job openings component fell by one point to 34%, capital spending plans increased by two points to 29% and plans to increase inventory investment rose by three points to 5% of businesses.
NFIB President and CEO Juanita D. Duggan commented: “A continued focus on a recession by policymakers, talking heads, and the media clearly caused some consternation among small businesses in previous months, but after shifting their focus to other topics, it’s become clear that owners are not experiencing the predicted turmoil.”
Some 34% of business owners reported job openings they couldn’t fill, down by a point month over month. A full 25% of business owners said finding qualified workers remains their single most important business problem, followed by taxes (15%) and government regulations (13%).
The group’s chief economist, William Dunkelberg, commented:
On Main Street, small business owners are mostly focused on business, which is good. Labor shortages handicap firms in every industry, but especially in manufacturing and construction. Rising labor costs are becoming a bit more of a problem, but have not yet triggered the surge in price hikes that the Fed has been hoping to see for years now. … Consumer sentiment has held up well in spite of the political chaos in Washington D.C. as has consumer spending (lots of jobs). Only a major unexpected disruptive event can dent the economy in the near term.