The NFIB small business optimism index is slightly higher at 89.4 in May after 89.0 in April. The reading is above the consensus of 88.4 in the Econoday survey of forecasters. The NFIB reported noted that the index remains below its 49-year average of 98 for the seventeenth month in a row. The uncertainty index is little changed at 71 in May after 72 in April. Uncertainty remains elevated and is likely associated with ongoing inflationary pressures. The report said that 25 percent of owners reported that inflation is their single biggest problem in May.

The month-over-month increase is mainly due to a single component. The components were up in four categories, down in five, and unchanged in one. The largest increase is a 6 point rise in plans for capital expenditures to 25 percent in May. There's a hint here that businesses are investing in infrastructure, but perhaps also in automation where possible. Small businesses continue to see a dearth of workers with the right skills to fill open jobs. The next largest increase is 3 points in plans to increase inventories to minus 2 percent. The largest decrease is a 3 point drop in the earnings trend to minus 26 percent. Plans to expand are unchanged at 3 percent in May and consistent with a sluggish outlook for business conditions. The remaining components see a normal month-to-month variation of a point or two.

The small business optimism index has been below, and often deeply below, the historical average of 98 for 16 months in a row. May's consensus is 88.4 versus 89.0 in April.

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.

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.