US NFIB Survey: April Optimism Index +2.7 to 103.5 - Text

     WASHINGTON (MNI) - The following are excerpts from the National Federation

of Independent Business' monthly Small Business Optimism index published

Tuesday:

     Optimism among small business owners continued its steady climb in April,

with the  NFIB Small Business Optimism Index increasing 1.7 points to 103.5.

Sales improved in April, the inventory soft spot seen in last month's report

rebounded, and profit trends posted a very solid advance. Job creation plans

gained, hiring remained strong, and expectations for sales, business conditions,

and credit conditions all improved. 

     "America's small and independent businesses are rebounding from the first

quarter 'shut down, slow down' and don't appear to be looking back. April's

Index is further evidence that when certainty and stability increase, so do

optimism and action," said NFIB President and CEO Juanita D. Duggan. "The

continued economic boom is thanks, in a major way, to strong growth in the small

business half of the economy."

     A net nine percent of all owners (seasonally adjusted) reported higher

nominal sales in the past three months, a four-point improvement, and the net

percent of owners expecting higher real sales volumes rose one point to a net 20

percent of owners. The net percent of owners reporting inventory increases fell

three points to a net two percent (seasonally adjusted). This is consistent with

the significant build up in the first quarter that added nearly one point to GDP

growth, and owners slowed additions to wait and see how much customers reduced

the excess stock. The net percent of owners viewing current inventory stocks as

"too low" improved two points to a net negative four percent as fewer owners

viewed stocks as excessive. 

     The net percent of owners planning to expand inventory holdings rose from a

negative one percent to two percent, a three-point gain, indicating that strong

sales gains resolved the excessive Q1 inventory build and owners are ready to

place new orders and build inventory.

     "The 'real' economy is doing very well versus what we see in financial

market volatility. Many jobs are being created, and GDP produced with no

substantive inflation pressure. The pace of economic growth has accelerated, and

consumers and small businesses are an important part of the improvement in

sales," said NFIB's Chief Economist Bill Dunkelberg.

     The frequency of reports of positive profit trends improved five points to

a net negative three percent reporting quarter on quarter profit improvements, a

very solid gain. Twenty-seven percent plan capital outlays in the next few

months, unchanged. While investment spending has been solid for the past two

years, more will be needed to make up for the years of weak investment spending

starting in 2008. From the start of the recovery in Q3 2009 through 2016, the

average percent reporting capital outlays was 54 percent and was as low as 44

percent (September, November, December 2009 and August 2010).  After 2016, the

average has been 60 percent, with a high of 66 percent reached in February 2018.

 Recent productivity numbers suggest that the revival in small business

investment has started to pay off with gains in worker productivity.

     As reported in the April NFIB Jobs Report, 24 percent of owners cited the

difficulty of finding qualified workers as their Single Most Important Business

Problem, one point below the record high. Fifty-seven percent reported hiring or

trying to hire (down three points), but 86 percent of those hiring or trying to

hire reported few or no qualified applicants for the positions they were trying

to fill. Thirty-eight percent of all owners reported job openings they could not

fill in the current period, down one point from the record high. Overall,

reports of rising compensation are holding at historically high levels, with

reports of higher worker compensation rising one point to a net 34 percent of

all firms.  Plans to raise compensation were unchanged at a net 20 percent. 

     Owners expecting better business conditions increased two points to a net

13 percent and those expecting easier credit conditions increased three points.

Four percent of owners reported that all their borrowing needs were not

satisfied, up one point and historically very low. Two percent reported that

financing was their top business problem (up one point) compared to 24 percent

citing the availability of qualified labor, 16 percent citing taxes, and 15

percent citing regulations and red tape.

     Optimism Components:        Seas Adj Level %     Change

     PLANS TO INCREASE EMPLOYMENT      18                 2

     PLANT TO MAKE CAPITAL OUTLAYS     27                 0

     PLANS TO INCREASE INVENTORIES      2                 3

     EXPECT ECONOMY TO IMPROVE         13                 2

     EXPECT RETAIL SALES HIGHER        20                 1

     CURRENT INVENTORY                 -4                 2

     CURRENT JOB OPENINGS              25                 2

     EXPECTED CREDIT CONDITIONS        -4                 3

     NOW A GOOD TIME TO EXPAND         25                 2

     EARNINGS TRENDS                   -3                 5

     TOTAL CHANGE                   103.5                19

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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