US DATA
The NFIB Small Business Optimism index rose to the highest level since October 2018 in December, up 3.4 points at 105.1. The improvement in optimism appears to be largely driven by the November election result (we saw a similar surge in December 2016 after Donald Trump's first election as president). Of note, "the net percent of owners expecting the economy to improve rose 16 points from November to a net 52% (seasonally adjusted), the highest since the fourth quarter of 1983."
- That included the highest percent of respondents seeing it as a good time to expand their business since Feb 2020, with multiyear highs for other readings including real sales volume expectations (Jan 2020) and inventory investment (Dec 2021).
- The "hard" components of the Optimism index (NFIB defines as: Job Creation Plans, Job Openings, Inventory Plans, Earnings, Capital Expenditure Plans) were more mixed than the surging "soft" categories (Expected Business Conditions, Outlook for Expansion, Expected Real Sales, Expected Credit Conditions, Inventory Satisfaction), though. Actual earnings and sales remained unchanged from a soft November.
- In the closely-watched employment categories, the survey showed that the net percent of owners raising worker compensation fell to the lowest since March 2021 (the % planning to raise compensation in the next 3 months was down 4 points from November). However, hiring plans hit the highest since May 2023. The inflation categories (actual changes and plans) were unchanged vs November.
- It's hard to get a gauge on the underlying signal on economic activity and inflation from the survey given the post-election exuberance, though overall this is a solid if mixed report.
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