Small Business Optimism Jumped 2.3 Points to 104.7 in November
Washington, DC, December 10, 2019-Small business optimism posted the largest month-over-month gain since May 2018, rising 2.3 points to 104.7 in November, according to the NFIB.
The exceptional Optimism Index reading was bolstered by seven of the ten Index components advancing, led by a ten-point improvement in earnings. Owners reporting it is a good time to expand increased by six points and those expecting better business conditions increased by three points. The NFIB Uncertainty Index fell six points in November to 72, adding to the four-point drop in October and the lowest reading since May 2018.
“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,” said NFIB chief economist William Dunkelberg. “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.”
Earnings, or the frequency that owners report positive profit trends, rose ten points, one point below the record set in May 2018, to a net 2% reporting quarter on quarter profit improvements. Stronger profits negated some cost pressures (especially labor) limiting the need to raise prices. A net 12% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, up eight points and the highest level since May 2018.
“Owners are 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,“ said NFIB chief economist William Dunkelberg. “Owners are most closely focused on issues that directly impact their business, including the real, significant tax relief they were given two years ago, and they’re anxious to see that relief made permanent.”
As reported last week in NFIB’s monthly jobs report, a net 30% of small business owners, seasonally adjusted, reported raising compensation (unchanged) and 26% plan to do so in the coming months, up four points and the highest level since December 1989. Job creation jumped in November, with an average addition of 0.29 workers per firm, the highest level since May. Finding qualified workers though remains the top issue for 26% reporting this as their number one problem, one point below August’s record high.
Owners raising average selling prices rose two points to a net 12%, seasonally adjusted. Price hikes were most frequent in the retail trades (7% lower, 24 higher) and construction (6% lower, 23 higher). On balance, inflationary pressures are weak on Main Street as confirmed by government inflation reports.
November reflects a stark departure from previous months of clatter months about a possible recession that dampened owners’ economic outlook. But the current focus and noise in Washington, D.C. around impeachment is proving to have little, if any, impact on small business owners, no different than during the impeachment proceedings of President Bill Clinton.