Small Business Optimism Barely Budges, Beats Consensus Forecast

WASHINGTON, D.C. — The National Federation of Independent Business (NFIB) Small Business Optimism Index barely budged in December, ticking down just 0.4 points to 104.4.

The consensus forecast was looking for 104 even, and forecasts ranged from 100.7 to 105.0. The skills gap continues to be the top cited challenge, a change from when the tax and regulatory environment was cited as the top concern for businesses under the previous administration.

As People’s Pundit Daily (PPD) previously reported and the NFIB Small Business Optimism Index confirms, job openings set a record high and job creation plans are strengthening.

In December, the U.S. economy boasted 150,000,000 jobs for the first time ever. The survey also confirmed wage growth detailed by the monthly jobs report, indicating higher worker compensation remained near record levels and inventory investment plans surged.

Expected real sales growth and expected business conditions in the next six months, however, accounted for the modest decline in the Index.

“Optimism among small business owners continues to push record highs, but they need workers to generate more sales, provide services, and complete projects, said NFIB President and CEO Juanita D. Duggan. “Two of every three of these new jobs are historically created by the small business half of the economy, so it will be Main Street that will continue to drive economic growth.”

A recent historical perspective (H/T NFIB):

• Actual hiring strengthened to the highest reading in six months, job openings are at a record high levels, and plans to create new jobs are down only three points from August’s record high.
• The net percent of owners expecting better business conditions in six months and the percent viewing the current period as a good time to expand have both tapered off since the record high Index reading in August but still remain well above their historical averages.
• Actual capital outlays are five percentage points higher than in August, although plans for outlays are eight points below the high for this expansion.
• Plans to invest in inventories are only two points below August, the record high. Satisfaction with inventories is two points better.

“Recently, we’ve seen two themes promoted in the public discourse: first, the economy is going to overheat and cause inflation and second, the economy is slowing and the Federal Reserve should not raise interest rates,” said NFIB Chief Economist Bill Dunkelberg. “However, the NFIB surveys of the small business half of the economy have shown no signs of an inflation threat, and in real terms Main Street remains very strong, setting record levels of hiring along the way.”