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Small Businesses Weigh In - May 8, 2018

Last week was declared “2018 Small Business Week” by President Trump, who showed his affection for the little guy by saying, “Small business owners embody the American pioneering spirit.” Today we got to hear how small businesses feel about the whole arrangement. NFIB’s Small Business Optimism Index, which is strongly related to ISM and Industrial Production, came in at 104.8, beating analyst estimates by 0.3, and up from March by 0.1. As far as Trump is concerned, there were some mixed signals. When small businesses were asked for the most important reason for their expansion outlook, Economic Conditions was most often cited as a reason for optimism, while, unsurprisingly, the Political Climate was the reason most often given for uncertainty.

Though the Optimism Index is the headline number, the data release is as rich and varied as a multicourse meal and one of our favorite sources of data. Among the highlights from today’s release include:

“Reports of employment gains remain strong among small businesses, inconsistent with the BLS report for March employment gains.”

“50 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill.”

“Twenty-nine percent plan capital outlays in the next few months, up 3 points.”

“Fifty-nine percent of construction firms and 56 percent of manufacturing firms expect higher real sales volume in the coming months.”

“The NFIB data predict a PCE inflation rate of 2.1 percent inflation rates in the months ahead.”

“Reports of higher worker compensation were unchanged at a net 33 percent, the highest reading since 2000.”

“The frequency of reports of positive profit trends improved 3 percentage points to a net negative 1 percent report in quarter on quarter profit improvements, the best reading in the survey’s 45 year history.”

“The average rate paid on short maturity loans was up 30 basis points at 6.4 percent, rates are rising gradually with Fed policy moves.” (While at the same time, Financial and Interest Rates being cited as the most important problem is at an all-time low!)

The full report is worth reading, and the dynamics of sentiment around the 2016 elections is remarkable, but for the time-depleted, the NFIB offered the following in their summary:

“Overall the outlook remains exceptionally positive.”

“The main impediment to growth will be the short supply of labor, which plagues all industries but especially manufacturing and housing.”

“That said, 2018 will be ‘lookin’ good’.”