Small Business Optimism Remains Historically High As Sales And Profits Maintain Strength
NEW ORLEANS — The Small Business Optimism Index posted its sixth-highest reading in survey history for the month of June, at 107.2, down 0.6 from May. Since December 2016, the Index has averaged an unprecedented 105.4, well above the 45-year average of 98 and rivaling the all-time high of 108.0 in July 1983.
“Small business owners continue to report astounding optimism as they celebrate strong sales, the creation of jobs, and more profits,” said NFIB President and CEO Juanita Duggan. “The first six months of the year have been very good to small business thanks to tax cuts, regulatory reform, and policies that help them grow.”
State-specific data is unavailable, but NFIB State Director Dawn Starns said, “Our members have confidence in the direction of the economy, so they're more willing to add jobs, replace old equipment, and expand their businesses.”
Highlights from the June report include:
- Owners reported some of the strongest nominal sales in years.
- Plans to invest in additional inventories advanced solidly.
- Plans to create new jobs posted a solid gain and the percent of owners with open positions tied the record high.
- Reports of compensation increases remained historically high and finding qualified workers easily held on to the top spot in the “single most important business problem” list.
A net 10 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months compared to the prior three months, down five points but still one of the strongest readings in years. June is the seventh consecutive strong month of reported sales gains. Reports of sales increases were most frequent in manufacturing and the wholesale trades.
“There was a fractional decline in the Index from May to June, statistically insignificant. Small business owners are already seeing their bottom lines grow due to strong sales and regulatory relief and the new tax law is expected to push profits higher as the year progresses,” said NFIB Chief Economist Bill Dunkelberg.
The frequency of reports of positive profit trends hit a record high in May, moving down only four percentage points in June, maintaining one of the best readings in the survey’s 45-year history. Additionally, reports of positive sales trends have been historically strong for the past few months, so owners have had to satisfy the strong sales demand by selling out of inventories. This produced an increase in the percent of owners planning to invest in new inventory stocks in the coming months.
The net percent of owners viewing current inventory stocks as “too low” gained four points to a net zero percent, a very positive move. This confirms that the inventory reductions reported were indeed a result of strong sales, not a result of a less certain future.
As reported in NFIB’s June jobs report, 63 percent of owners reported hiring or trying to hire, up five points from last month and the highest level since September 1999. However, 55 percent (87 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill.