Small business owners are more optimistic about their prospects for success than they’ve been since the Reagan administration. The Index of Small Business Optimism, the output of a quarterly survey of economic indicators tabulated by the National Federation of Independent Business, increased in February to the second highest level in the survey’s 45-year history.
Notably, when asked what was the No. 1 business problem they faced, fewer business owners said “taxes” than have in more than a decade. Other indicators showed improved earnings, increased investment in inventory and capital outlays, and increases in employee compensation. The No. 1 problem business owners reported, in increasing numbers, was their ability to find qualified workers.
“Overall, the small business sector is very encouraged by the economic policies of the administration and the strength of the economy,” the NFIB’s report stated. Small business owners have said they were willing to invest in their businesses by hiring when workers could be found. Of the 52 percent of surveyed business owners who reported hiring or trying to hire, 90 percent of them reported few to no qualified applicants for positions they were trying to fill. Twenty-two percent of small business owners indicated the difficulty of finding qualified workers was their most important business problem. Fifteen percent of survey respondents reported using temporary workers, the highest number since November 2016.
Reports of higher worker compensation remained unchanged from the previous month, at 31 percent, yet it remained at the highest level in survey history.
In terms of the credit needs of small business owners, 2 percent of survey respondents reported their borrowing needs were not satisfied — a record low. Thirty-two percent reported all of their credit needs were met while 51 percent said they were not interested in a loan. Only 2 percent of small business owners said financing was their top business concern.
Two-thirds of respondents reported capital outlays occurring in February, an increase of 5 percentage points from January and the highest reading since 2004. Of those making expenditures, 45 percent reported new equipment purchases, 30 percent reported vehicle purchases, and 15 percent reported investments in improved or expanded facilities. With improved capital spending signaling increased confidence in the future of the economy, the NFIB concludes “the small business sector is on fire.
“Hiring is excellent and would be stronger if the labor market were not so tight,” the report concludes. “This is and will be a major constraint on growth.”
The NFIB has collected data on small businesses since 1973. Data is collected through monthly surveys of its membership. February 2018 data was a compilation of 642 individual responses, or 12 percent of a membership sampling of 5,000.