American small business owners’ optimism about the economy has reached a level not seen in more than a decade, according to the National Federation of Independent Business. The NFIB released its December 2016 Index of Small Business Optimism report on Jan. 10, which showed their measure of economic confidence among business owners jumped 7.4 points since the prior month’s report. The Index hit 105.8 points, the highest it has been since December 2004.
The Optimism Index is based on data collected from NFIB members. It is calculated using 10 indicators including businesses’ investments and hiring plans, current inventories, job openings and business owners’ economic expectations for the coming months. The data for this report was collected from 619 small business owners across several industries including retail, agriculture, construction and manufacturing.
Rising optimism about the nation’s economic future drove the increase in the index with 50 percent of respondents saying they expect the economy to improve, 31 percent expecting increased sales and 23 percent believe that now is a good time to expand. This translates into plans to make capital investments by 29 percent of the businesses surveyed, and 16 percent say they will increase hiring.
There were a few negatives for businesses in this otherwise sunny report. While more than half the businesses surveyed report they had job openings, 44 percent said they found few or no qualified applicants. This indicates a tightening job market, which is good news for job seekers, but puts pressure on businesses to increase wages and prices. Another negative is that businesses that regularly borrow have reported credit is tighter than it was three months ago, which could dampen expansion plans.
The report authors note the index made this leap following the announcement of the presidential election results. A similar survey, University of Michigan’s Surveys of Consumers, also showed a post-election surge in economic confidence. When asked, “What is the single most important problem facing your business today,” 21 percent of respondents cited taxes, while 19 percent answered “government regulations and red tape.” President Trump pledged to address these problems during his campaign.
“Business owners are feeling better about taking risks and making investments,” said NFIB President and CEO Juanita Duggan in a news release announcing the report findings. “Optimism is the main ingredient for economic expansion. We’ll be watching this trend carefully over the next few months.” The NFIB publishes the Index of Small Business Optimism the second Monday of each month.
This article was written by Gillian Burdett for Small Business Pulse