NFIB: Small Business Optimism Eased in December but Remained Highly Elevated in 2017

The National Federation of Independent Business reported that the Small Business Optimism Index declined from 107.5 in November to 104.9 in December. November’s reading was not far from the record high in July 1983 (108.0). Note that readings above 100 are consistent with strong growth among small business owners, and the robust data seen for much of the past year would suggest a healthy economic outlook overall. Indeed, the headline index, which averaged 95.3 in 2016, jumped to an average of 104.9 in 2017, consistent with the December figure.  

The percentage of respondents suggesting the next three months should be a “good time to expand” remained at 27 percent. It averaged 23.4 percent in 2017, which was well above the 9.7 percent average in 2016. In addition, the net percentage reporting increased sales over the past three months rose from -5 percent in November to 9 percent in December. Nonetheless, the net percentage feeling that sales should be higher over the next three months dropped from 34 percent to 28 percent. Despite the easing in that measure, the net percentage expecting higher sales has soared from 4.6 percent in 2016 to 23.3 percent in 2017.

The labor market also remains strong. The net percentage planning to add workers in the next three months edged down from 24 percent to 20 percent, with the average rising from 11.3 percent in 2016 to 18.0 percent in 2017. Moreover, the percentage with positions unable to be filled right now inched up from 30 percent to 31 percent in this report. Similarly, capital expenditures activity remained promising, with those investing in capital up from 59 percent to 61 percent, the highest level since May. Those planning to make a capital expenditure over the next three to six months increased from 26 percent to 27 percent.

Respondents cited taxes as the “single most important problem” (21 percent), highlighting the need for comprehensive business tax reform, which was enacted in December. The quality of labor (19 percent) and government regulations and red tape (16 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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