Small Business Optimism Edged Higher in May

By June 11, 2013Economy

The National Federation of Independent Business (NFIB) said that small business owners sentiment rose to its highest level in one year, up from 92.1 in April to 94.4 in May. Coincidently, that was the same index reading as was observed in May 2012. The optimism index has edged higher over the course of the past seven months, rising from a low of 87.5 in November. The variable that has changed over that time has been the perception about new orders. Sales expectations have risen from -5 percent in November to +4 percent in April to +8 percent in May. With improved business activity predicted, optimism levels have gone up, as you might expect.

Mirroring this rise, the percentage of respondents saying that the next 3 months are a good time to expand increased from 4 percent to 8 percent for the month. Despite the higher figure, there continues to be a uncertainties that dampen the enthusiam for expansion. The top reasons cited for it not being a good time to expand were economic uncertainties and the political climate.

The single most important problem in this survey – a widely watched measure for those who follow this report – was taxes, mentioned by 24 percent of those answering the question. This is the second month in a row that taxes topped the list, and it almost certainly is a reference to higher marginal and payroll taxes in 2013. The other top concerns were government regulations (23 percent) and poor sales (16 percent).

The employment picture did not change much from last month. The net percentage of respondents planning to hire in the next 3 months declined from 6 percent to 5 percent, but that was still an improvement from the zero reported in March. The percentage of those saying that they were unable to fill positions right now rose from 18 percent to 19 percent.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

Leave a Reply