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- On July 31, 2016
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The National Federation of Independent Business’s (NFIB) Index of Small Business Optimism has seen some conflicting trends in their latest monthly economic survey. The results show that optimism rose by one point in April 2016, but faith in the economy as well as the labor market has dwindle. The overall Index of Small Business Optimism rose 1 point in April 2016 and is now at 93.6, though still well below the 42-year average of 98 in 2014, according to the NFIB.
The NFIB reported that small business owners who expect business conditions and the economy to improve has declined. On the plus side, the survey found that 53-percent of small businesses owners are trying to hire but 46-percent said there was a lack of talent in the marketplace. The NFIB explains that there are several reasons for this drop. When small business owners were asked about whether or not it is a good time to grow their businesses, many said that they were having hiring challenges. The leading thought behind this is that the labor market in tightening, reports the NFIB, and finding qualified workers is a challenge in today’s economy.
Small Businesses also pointed to the political climate was second most frequently cited reason for why many owners are not anxious to expand, according to the NFIB. The NFIB writes, “Small business owners who expect business conditions to improve in the next six months was the only component to decline (in the index).”
“Despite a gain in NFIB’s optimism reading, small business owners remain extremely pessimistic about the economy, and rightfully so,” said NFIB Chief Economist William C. Dunkelberg. “It was a relief to see the Index turn up, ending a long string of declines. However, it’s still down from December 2014 when the Index hit an expansion high of 100.
Dunkelberg continues, “Overall, there is no exuberance to be found in the economy.”
Declining sales was also a prominent theme. The NFIB reported that that 11-percent of small businesses claimed that weak sales accounted for their toughest business problem. This is a reason many small business owners are seeking working capital and other short-term financing alternatives. In addition, employee earnings also took a slight hit as results found that small business owners planning to increase worker compensation fell 1 point to a net 15 percent.
The top survey’s results are as follows:
- Plans to increase employment: 11% with a 2-point increase
- Plans to increase inventory: 0% up 2-points
- Expects economy to improve: -18%, down 1-point
- Expects real sales higher: 1%, 0-point gain
- Now a good time to expand: 8% up 2-points
- Earnings trends: -19% up 3-points
- Expected credit conditions: -6%, 0-point gain