US NFIB Survey: Feb Optimism Index +0.5 to 101.7 - Text

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

of Independent Business' monthly Small Business Optimism index published

Tuesday:

     The NFIB Small Business Optimism Index improved modestly in February,

increasing 0.5 points to 101.7. Views about future business conditions and the

current period as a good time to expand improved as did plans to make capital

outlays. Earnings trends weakened as a million laid off workers and others

affected by the shutdown cut back on spending. The loss of sales falls right to

the bottom line. Worker compensation and selling prices were lower in February

than they were in January, but job openings rebounded remaining at historically

high levels. The Uncertainty Index fell 1 point to 85, a small decline but still

showing a lot of residual uncertainty from the government shutdown.

     "Small business owners are thankful to have the government shutdown in the

rearview mirror but need more certainty about the future," said NFIB President

and CEO Juanita D. Duggan. "Small businesses put their money where their

expectations are as we've seen when they get tax and regulatory relief. The best

thing Washington can do for the small business half of the economy is to

continue the policies - tax cuts and deregulation - that leave them with more

resources to invest and find qualified workers."

     Small business owners who expect better business conditions improved five

percentage points and those viewing the current period as a good time to expand

increased two points in February. Twenty-seven percent plan capital outlays in

the next few months, up one point. Plans to invest were most frequent in

wholesale trades (43 percent), manufacturing (39 percent), construction (32

percent), and agriculture (31 percent).

     "Owners still want to grow and expect they could sell more if they could

hire employees to produce more. Small businesses want to expand in this growing

economy but only if they can find qualified applicants for their open

positions," said NFIB Chief Economist Bill Dunkelberg. "On the positive side,

now that the government is funded, owners should be getting back to business

with the rebound in consumer sentiment."

     The frequency of reports of positive profit trends fell four points to a

net negative nine percent reporting quarter on quarter profit improvements, the

weakest reading since 2017. Forty-one percent of those reporting weaker profits

blamed sales, 22 percent cited lower selling prices, and nine percent blamed

labor costs. For those reporting higher profits, 50 percent credited sales

volumes. Thirty-three percent credited higher prices for the results. The cost

of materials was not an issue.

     The net percent of owners raising average selling prices fell two points to

a net 13 percent, seasonally adjusted. Unadjusted, ten percent (unchanged)

reported lower average selling prices and 23 percent (down one point) reported

higher average prices. Seasonally adjusted, a net 26 percent plan price hikes

(down one point). With some sales weakness and concerns about the economy,

likely fewer than half will actually post price hikes.

     As reported in February's NFIB Jobs Report, job creation among small

businesses broke the 45-year record in February with a net addition of 0.52

workers per firm. The previous record was in May 1998 at 0.51 workers per firm.

The percent of owners citing labor costs as their most important problem also

hit an all-time high, with 10 percent of owners reporting labor costs as their

biggest problem. Reports of higher worker compensation fell five points to a net

31 percent of all firms. Uncertainty is not conducive to making permanent

compensation commitments.

     Optimism Components:        Seas Adj Level %     Change

     PLANS TO INCREASE EMPLOYMENT      16                -2

     PLANT TO MAKE CAPITAL OUTLAYS     27                 2

     PLANS TO INCREASE INVENTORIES      1                 0

     EXPECT ECONOMY TO IMPROVE         11                 5

     EXPECT RETAIL SALES HIGHER        16                 0

     CURRENT INVENTORY                 -2                 1

     CURRENT JOB OPENINGS              37                 2

     EXPECTED CREDIT CONDITIONS        -5                 0

     NOW A GOOD TIME TO EXPAND         22                 2

     EARNINGS TRENDS                   -9                -4

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

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