NFIB small business optimism index improves in November
By Michele Maatouk
Date: Tuesday 10 Dec 2019
(Sharecast News) - Small business sentiment in the US improved more than expected in November, according to the latest survey from the National Federation of Independent Business.
The small business optimism index rose to 104.7 from 102.4 in October, beating expectations for a reading of 102.8 and marking the biggest month-on-month increase since May 2018.
Seven out of the 10 components in the index advanced, led by a 10-point improvement in earnings.
Meanwhile, the NFIB uncertainty index fell six points to 72, marking the lowest reading since May 2018 as worries about a possible recession receded.
NFIB chief economist Bill Dunkelberg said: "This historic run may defy the expectations of many, but it comes as no surprise to small business owners who understand what a supportive tax and regulatory environment can do for their companies.
"As the two-year anniversary of the Tax Cuts and Jobs Act's passage approaches this month, small businesses, the world's third largest economy, are using those savings to power the American economy."
He said business owners were "aggressively moving forward" with their business plans, "proving that when they're given relief from the government, they put their money where their mouth is, and they invest, hire, and increase wages".
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The headline index was propelled by clear increases in the stock market-sensitive components, namely, economic expectations, good time to expand, and earnings expectations. Sales expectations fell by four points, though, to a three-year low; this might mean that firms recognised the impact of the August 1 announcement of tariffs on consumer goods was to pull forward spending into the late summer.
"Capex plans rose one point, completing the reversal of the drop in the spring. The index remains off its cycle high, and the prior decline still needs to come through in the hard data, but it signals a rebound in business investment next spring, trade war developments permitting.
"The labour market numbers are strong, with hiring intentions up three points, but this is not new information; these data were released last week, ahead of the official employment report, as usual. Rising comp plans signal further upside for wage growth.
"Overall, this clearly is a positive report. The headline index remains below its cycle peak, 108.8 in August last year, but that was supported by tax cuts and was not sustainable. Firms appear to be adapting to the new tariff regime, though that doens't mean they are happy about it. The only red flag here is the drop in sales expectations, but otherwise this is yet another signal that all the recession talk a couple months ago was misplaced."
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