NFIB - Small Businesses More Optimistic

Small businesses are responding to the recent improvements in the economy.  The latest release of the NFIB Small Business Optimism index rose in December for a 4th month almost recovering the losses from the summer confluence of the Japanese earthquake/tsunami/nuclear crisis, the debt ceiling debate and the Euro-crisis.  The most recent release ticked up to 93.8 from 92 in November with many of the internals improving as well.

One of the biggest concerns that we have been watching for some time is the view of "poor sales" as a primary concern for small businesses.  "Poor sales" has been a testament to a weak consumer which impacts the final demand on businesses suppressing future expansion.   In the recent months that concern has been lifting and the view by small businesses that this is a good time to expand operations is beginning to thaw.

This improvement in attitude was reflected throughout the survey with plans to increase inventories rising by 2%, expectations of an improving economy rising 4%,the expectation of higher real sales rising by 5% and improving earnings trends rising by 6%.  However, we must keep this improvement in line with reality.  Sales DO remain a real problem for many small businesses - it is just beginning to improve somewhat.  At a -7% there are still more firms with sales trending down than up.  While consumption definitely increased in the past couple of quarters, most likely due to some pent up demand post the economic shut down ...