September 2018 Small Business Optimism: Third Highest Reading In The Survey’s 45 Year History

from the National Federation of Independent Business

The NFIB Small Business Optimism Index continued its historic 23-month positive trend, with a reading of 107.9 in September, the third highest reading in the survey’s 45-year history. In the small business half of the economy, 2018 has produced 45-year record high measures of job openings, hiring plans, actual job creation, compensation increases (actual and planned), profit growth, and inventory investment.

[editor’s note: Market expectation from Econoday was between 107.0 to 109.2 (consensus 108.0 versus the actual reading of 107.9)].

The September 2018 survey showed:

Said NFIB President and CEO Juanita Duggan:

This is the longest streak of small business optimism in history, evidence that tax cuts and regulatory rollbacks are paying off for the economy as a whole. Our members say that business is booming and prospects continue to look bright.

Actual investment spending improved as prospects for the economy remain strong. Sixty percent of owners reported capital outlays, up four points from August. Of those making expenditures, 41 percent reported spending on new equipment (up two points), 26 percent acquired vehicles (up four points), and 16 percent improved or expanded facilities (down two points).

Consumer spending temporarily slowed in August, likely producing excess inventories but has picked up again which will reverse the build-up. The net percent of owners expecting higher real sales volumes rose three points to a net 29 percent of owners. Owners reporting inventory increases rose one point to a net five percent (seasonally adjusted). Strong expectations for higher real sales translate into higher expected returns on capital investments as well as a need for more employees.

Said NFIB Chief Economist Bill Dunkelberg:

The economy continues to deliver a spectacular performance considering its record length. Small business owners continue to face labor force challenges but are increasing compensation to keep up. With profits and investment remaining strong, our hope is that policymakers will stay the course and not screw around with success.

A record net 37 percent of owners reported raising overall compensation, as reported in last week’s NFIB monthly jobs report. This surpasses the previous record of a net 35 percent in May 2018. Twenty-four percent plan to increase total compensation at their firm and six percent plan reductions. Sixty-one percent of owners reported hiring or trying to hire, with 87 percent of those reporting few or no qualified workers. Thirty-eight percent of owners reported job openings they could not fill in the current period, unchanged from last month.