The National Federation of Independent Business (NFIB) said that small business confidence edged slightly higher last month. The Small Business Optimism Index rose from 91.6 in October to 92.5 in November. This reversed the declines in confidence observed in September and October surrounding the government shutdown, mirroring drops seen in other sentiment surveys. November’s figure was close to the year-to-date average of 92.3 for 2013 but below the peak of 94.4 experienced in May.
Small Business Optimism Index continued to be well below 100 – its threshold for stronger economic activity. It has not exceeded 100 since October 2006, over seven years ago. This suggests that the small business economy remains subpar overall.
The underlying data continued to reflect many of these weaknesses. For instance, the net percentage of those saying that they expect higher sales over the next three months was just 3 percent, up from 2 percent the month before. This was down from 8 percent who said the same thing in September. Earnings growth also remained weak.
Yet, there were also some signs of progress in the November data. The percentage of respondents saying that the next three months were a “good time to expand” increased from 6 percent to 9 percent, its highest level since July. Similarly, the number of job openings increased, with the net percentage planning to add workers in the next three months up from 5 percent to 9 percent. Those planning to increase their capital spending over the next three to six months were also up slightly from 23 percent to 24 percent.
As we have seen in recent surveys, economic conditions and the political climate were the top reasons cited by those saying that it was not a good time to expand. The “single most important problem” was government regulations once again, cited by 22 percent of those taking the survey. This was followed by taxes (21 percent) and poor sales (15 percent).
Chad Moutray is the chief economist, National Association of Manufacturers.
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