US: NFIB Small Business Optimism Index


Tue May 08 05:00:00 CDT 2018

Consensus Consensus Range Actual Previous
level 104.9 104.0 to 106.7 104.8 104.7

Highlights
The highest earnings improvement levels in 45 years helped support small business optimism in April after a sharp decline in the previous month, according to the National Federation of Independent Business (NFIB), whose monthly Small Business Optimism Index ticked up by 0.1 point in April to 104.8, roughly in line with the consensus forecast. Leading the monthly index marginally higher was a 3-point increase in actual earnings trends to a net minus 1 percent, driven by gains in productivity, stronger sales and the newly implemented tax law. Capital expenditure plans also improved by 3 points to a net 29 percent, with current capital outlays driven by new equipment spending and the acquisition of vehicles, while plans call for increased spending on training and labor-saving technology.

But while showing a slight improvement overall, small business optimism presented a mixed picture in April, as 4 of the 10 components of the index rose, 3 fell, and 3 remained unchanged from the previous month.

Among the positives was higher inventory satisfaction, with the net percent of owners viewing current stocks as too low rising 2 points to a minus 4 percent. Sales expectations also gained ground, rising 1 point to a net 21 percent, as 59 percent of construction firms and 56 percent of manufacturing firms expected higher sales volumes in the coming months, encouraged by wage growth and solid consumer sentiment.

Though labor markets remained strong and owners reported adding a net 0.28 workers per firm on average, the third highest reading since 2006, it was job creation plans that led the declining components, falling 4 points to a historically still strong net 16 percent. But job markets remained very tight, as 35 percent of owners reported job openings they could not fill, unchanged from March and matching the highest reading since November 2000. Labor quality remained the number 1 problem for the fourth consecutive month, and shortages were reported for skilled as well as unskilled workers, with nearly half of the firms reporting unfilled openings in some industries, particularly in construction and manufacturing.

Expectations of better business conditions also decreased, falling 2 points, albeit to a still high net 30 percent, and the net percent of business owners with the view that now is a good time to expand fell by 1 point to 27 percent.

Overall, with a reading that has been higher only 20 times out of the last 433 readings, small business owners were clearly still very optimistic about their businesses in the April survey, though less exuberant than in February, when the level was the second highest in the survey's 45-year history.


Market Consensus Before Announcement
Forecasters are calling for only a small bounce back in the small business optimism index which missed Econoday's low forecast in March on a step back in expectations. Econoday's call for April is 104.9 vs March's 104.7.

Definition
The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Description
Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market - especially small caps.