The National Federation of Independent Business (NFIB) reported that small business owner sentiment moved higher last month. The Small Business Optimism Index rose from 89.5 in March to 92.1 in April, its highest level in six months. As you might expect, an improved sales outlook helped to lift these figures, with the net percentage of respondents expecting higher sales increasing from -4 percent to +4 percent. In addition, small businesses appear to be more willing to increase hiring, as well, with the net percentage planning to hire in the next three months rising from zero in March to 6 percent in April.

This does not mean, however, that small businesses have moved beyond their challenges. Keep in mind that small businesses are said to be growing strongly when the Optimism Index exceeds 100, so we are still quite a way from that. Indeed, the net percentage of business owners saying that the next three months were a “good time to expand” was unchanged at four percent. As with past reports, the top reasons cited for it not being a good time to expand were economic uncertainties and the political climate. (continue reading…)

The National Federation of Independent Business said that small business owner confidence was virtually unchanged in May. The Small Business Optimism Index edged slightly lower from 94.5 in April to 94.4 in May. The longer-term trend is more positive, as the index stood at 90.9 at this point last year. Still, small businesses remain concerned about the economy, with the index well-below the threshold of 100 which would suggest growth for the sector.

The net percentage of respondents saying that the next three months are a “good time to expand” was also unchanged at 7 percent, where it has stood for three consecutive months. For those saying that it was not a good time for expansion, the economy was the top concern, with political uncertainty also a factor. With that said, last month “poor sales” dropped from being the top concern for the first time since 2008 to second place. This top concern this month is “taxes,” perhaps a recognition of the expiration of tax cuts at the beginning of 2013. After taxes, the top concerns were sales and the regulatory environment.

The data points behind the index were mostly mixed. Expectations of sales, earnings and capital spending were lower. In contrast, it appears that small business owners are stepping up their hiring, with employment and job openings measures showing increases. Credit conditions remain an ongoing concern.

Chad Moutray is chief economist, National Association of Manufacturers.