The National Federation of Independent Business (NFIB) said that optimism rose for the second straight month. The Small Business Optimism Index increased from 96.9 in April to 98.3 in May, its highest level so far in 2015. This suggests that small business owners have begun to move beyond the recent lull in confidence. Still, it remained below the peak observed in December (100.4), which was the highest level since October 2006. Indeed, this report continues to reflect lingering anxieties about the economy, even as owners indicate that they are more upbeat today than they have been in past years.
The good news was the many of the key indicators moved in the right direction in May. The percentage of respondents suggesting that now was a “good time to expand” increased from 10 percent to 14 percent, and sales grew a net 7 percent for the month, ending a four-month negative sales streak. In addition, the net percentage planning to hire over the next three months edged higher, up from 11 percent to 12 percent.
To be fair, many of these data points remain lower than in December, and there were also some areas that pulled back a little. For instance, the percentage planning to a capital expenditure over the next three to six months declined slightly from 26 percent to 25 percent, and the net percentage expecting sales to increase over the next three months dropped from 10 percent to 7 percent, its lowest level since November 2013. It is this latter point that gives us a little pause in an otherwise mostly positive report, as it suggests some caution moving forward.
The top “single most important problem” was a tie between taxes and regulatory burdens, with each cited by 23 percent of those taking the survey. This was followed by the quality of labor (13 percent) and poor sales (11 percent).
Chad Moutray is the chief economist, National Association of Manufacturers.
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