Small company outlook becoming more positive
The outlook at small U.S. companies is more positive than it's been in several years. In February, the National Federation of Independent Business (NFIB) index of small company optimism rose to 94.5 — its highest level since December 2007. The index also isn't terribly far off the average of 100.7 it posted during the previous expansion that began in November 2001.
“The future is looking brighter for a few more small-business owners,” comments William Dunkelberg, NFIB chief economist. Still, he notes, “this is not a reading that characterizes a strongly rebounding economy.”
In fact, earnings expectations have remained negative at many small companies and many say it's not a good time to expand. Nevertheless, hiring plans at small companies have risen to the second-highest level since September 2008, a sign employment may soon pick up.
In February, small businesses planning to increase payrolls rose two points to a net of 5%. A net 15% said they were having trouble filling job openings, the highest level since September 2008. Net figures were calculated by subtracting the percentage of business owners giving a negative answer from those giving a positive response and adjusting for seasonal variation.
“Employment in the small-business space is increasing slowly,” says Kiran Patel, general manager of the small business group at Intuit, which markets software solutions for small- and medium-sized firms. “Things are a lot better today than they were eighteen months ago, but we're far from being at the place we were before the deep recession.”
In February, an NFIB gauge of small company expectations for better business conditions six months from now fell a point to a net 9%. An index of whether small firms think it's a good time to expand fell, too, by one point to 7%. A gauge of whether they expect credit conditions to ease held at minus 10%.
Plans for capital investment by small firms over the next few months held at a net 22%. Meanwhile, a net 2% of small business owners said their inventories were too low, up from zero in the prior month, signaling renewed stockpiling. “This signals a return in the months ahead to increases in average prices as supply adjustments restore pricing power," NFIB says.
February's NFIB index of small company optimism was based a survey of 774 small firms. A small business is defined as an independent enterprise employing up to 500 people.
Confidence at U.S. Small Companies Hits Three-Year High (http://www.bloomberg.com/news/2011-03-08/confidence-at-u-s-small-companies-climbs-to-highest-level-in-three-years.html). Bloomberg, March 8, 2011
Confidence at U.S. Small Companies Hits Three-Year High (http://forexnewspaper.blogspot.com/2011/03/confidence-at-us-small-companies-hits.html). Forex News Paper, March 8, 2011