Modest Gains in Small Business Sentiment in July

By August 13, 2013Economy

The National Federation of Independent Business (NFIB) said that small business owners’ sentiment rose modestly, up from 93.5 in June to 94.1 in July. This brings the index essentially back to where it was in May (94.4), with the average of the past four months (April to July) of 93.5. The average in the five months before that (November to March) was just 88.9, suggesting an upward trend in small business optimism in recent months. Yet, it is also true that small business optimism remains sub-par overall, with the index still below the threshold of 100 which would indicate strong growth in the sector. The last time the NFIB’s index has a reading over 100 was October 2006.

The percentage of respondents who say that the next three months are a “good time to expand” increased from 7 percent to 9 percent for the month. That was the highest percentage since January 2012. Of those saying that it was not a good time for expansion, the economy and political environment were the main reasons. Along those lines, taxes and government regulations were the single most important problems cited by those taking the survey, with each garnering 21 percent. This was followed up by poor sales, which has not been the top concern since November.

The key takeaways from this report were the modest gains in many of the business variables. Net sales expectations were somewhat higher, up from 5 percent in June to 7 percent in July. This was only slightly below May’s reading of 8 percent, but better than the -4 percent observed in March. Similarly, net hiring plans over the next three months have risen from zero in March to 7 percent in June to 9 percent in July. Hopefully, this suggests moderate increases in employment in the coming months. Despite the slight upticks in sentiment, earnings growth remains weak, and capital spending plans were unchanged from the previous survey.

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) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, 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

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