| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Index | 89.9 | 89.0 to 90.0 | 88.5 | 89.4 |
Highlights
The NFIB small business optimism index dips for the third month in a row to 88.5 in March after 89.4 in February. The consensus in the Econoday survey of forecasters anticipated an increase to 89.9 in March. The decline reflects concerns about the economic outlook as progress in bringing inflation back to the Fed's 2 percent objective seems stalled and the timing of possible rate cuts more distant. The NFIB uncertainty index is up to 77 in March after 76 in February.
Two of 10 index components are up in March, 6 are lower, and two are unchanged. The largest negative contribution is from an 8-point drop to minus 18 percent in expectations for higher sales followed by a 4-point decline to 4 percent in now is a good time to expand. There is only a partial offset from the increases of 3 points to minus 36 percent for expectations for the economy to improve and 2 points to minus 29 percent for the earnings trend.
The report noted that the single most important problem for small businesses remains inflation. The 25 percent reading in March is essentially the same as the 24 percent a year ago, although it is well down from the peaks seen in 2022.
Two of 10 index components are up in March, 6 are lower, and two are unchanged. The largest negative contribution is from an 8-point drop to minus 18 percent in expectations for higher sales followed by a 4-point decline to 4 percent in now is a good time to expand. There is only a partial offset from the increases of 3 points to minus 36 percent for expectations for the economy to improve and 2 points to minus 29 percent for the earnings trend.
The report noted that the single most important problem for small businesses remains inflation. The 25 percent reading in March is essentially the same as the 24 percent a year ago, although it is well down from the peaks seen in 2022.
Market Consensus Before Announcement
The small business optimism index has been below the historical average of 98 since January 2022. March's consensus is 89.9 versus 89.4 in February.
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.
