NFIB: Small Business Optimism Index Was Flat in May, Remaining Highly Elevated

The National Federation of Independent Business (NFIB) said that the Small Business Optimism Index was flat in May, remaining at 104.5 for the second month. Sentiment among owners has remained highly elevated over the course of the past six months despite easing from January’s 105.9 reading, which was a 12-year high. Over that six-month period, the headline index has averaged 105.1. For comparison purposes, the index was 93.8 one year ago, illustrating the sizable uptick in confidence among small business leaders since November. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” edged down from 24 percent to 23 percent, which was the average seen over the past six months. In May 2016, just 9 percent said the same thing.

The percentage expecting sales to increase over the next three months ticked higher in May, up from 20 percent to 22 percent. While this was lower than the 31 percent seen in December, which was its highest level since October 2005, it continued to be a strong reading. One year ago, it was 1 percent. Likewise, the net percentage planning to add workers in the next three months increased from 16 percent to 18 percent, a four-month high. That suggests that more small businesses are planning to add to their workforce. Nine percent were planning to hire as recently as August, for instance.

On the investment front, 62 percent of small business owners in May said that they had made a capital expenditure in the last six months, up from 59 percent in April but down from March’s 64 percent response, the highest reading since December 2013. Similarly, the percentage planning to make a capital expenditure in the next three to six months inched up from 27 percent to 28 percent. Small firms appear to be stepping up their capital spending relative to just a few months ago, which is encouraging.

The top “single most important problem” was taxes (22 percent), highlighting the need for comprehensive business tax reform. The quality of labor (19 percent), government regulations (13 percent) and the cost and availability of insurance (11 percent) also topped the list.

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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