US NFIB Survey: March Optimism Index +0.1 to 101.8 - 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 increased 0.1 points to 101.8 in

March, a historically strong level and an indication that small businesses

continue to power the economy after being briefly shaken by January's government

shutdown. Overall, the Index anticipates solid growth, keeping the economy at

"full employment" with no signs of a recession in the near term. The Uncertainty

Index dropped six points to 79, returning to a more normal level for recent

years.

     Five Index components improved, two were unchanged, and three fell. Labor

market indicators improved, the outlook for expansion, real sales and reports of

rising earnings gained ground, and capital spending plans held steady. The major

soft spot was in inventories with stocks viewed as too large and plans to invest

in inventories turning slightly negative - more firms planning reductions than

additions.

     "Small business owners continue to create jobs, expand their operations,

and are enjoying strong sales," said NFIB President and CEO Juanita Duggan.

"Since Congress resolved the shutdown, uncertainty has declined as small

business owners add jobs, increase sales, and invest in their businesses and

employees."

     Sixty percent of small business owners reported capital outlays, up two

points and 27 percent plan capital outlays in the next few months, unchanged.

Plans to invest were most frequent in wholesale trades (36 percent),

manufacturing (34 percent), retail (33 percent), and transportation (32

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

nominal sales in the past three months, a six-point improvement, rebounding back

from the "shut down, slow down" in sales. The net percent of owners expecting

higher real sales volumes rose three points to a net 19 percent of owners, a

solid reading.

     The net percent of owners viewing current inventory stocks as "too low"

lost four points to a net negative six percent, suggesting that inventories are

still viewed as excessive. Imbalances were very large in the wholesale trades

(-24 percent) and retail (-14), while in agriculture, 11 percent reported stocks

too low compared to eight percent too high. The net percent of owners planning

to expand inventory holdings fell from one percent to a negative one percent, a

two-point decline.

     "Owners are growing their businesses and expect that they can sell more if

they can produce more with additional employees," said NFIB Chief Economist Bill

Dunkelberg. "Investment spending has been solid for the past two years and

owners are choosing to invest in their workforce as well by creating new jobs

and raising wages."

     As reported in the March NFIB Jobs Report, owners have added a record high

number of new employees for the past two months, only one percent (down two

points) of small business owners reported reducing employment an average of 2.4

workers per firm (seasonally adjusted) in March, the lowest percentage of owners

reporting reductions in survey history. Twelve percent (unchanged) reported

increasing employment an average of 2.7 workers per firm. Sixty percent reported

hiring or trying to hire (up three points), but 54 percent (90 percent of those

hiring or trying to hire) reported few or no qualified applicants for the

positions they were trying to fill (up five points). Twenty-one percent of

owners cited the difficulty of finding qualified workers as their Single Most

Important Business Problem, only four points below the record high. Thirty-nine

percent of all owners reported job openings they could not fill in the current

period, up two points from February and equal to the record high set in

December. A net 33 percent reported higher compensation in March, up two points.

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

satisfied, unchanged and historically very low. Thirty-three percent reported

all credit needs met (down one point) and 51 percent said they were not

interested in a loan, unchanged. Six percent reported their last loan was harder

to get than the previous one, unchanged and historically low.

     Optimism Components:        Seas Adj Level %     Change

     PLANS TO INCREASE EMPLOYMENT      18                 2

     PLANT TO MAKE CAPITAL OUTLAYS     27                 0

     PLANS TO INCREASE INVENTORIES     -1                -2

     EXPECT ECONOMY TO IMPROVE         11                 0

     EXPECT RETAIL SALES HIGHER        16                 0

     CURRENT INVENTORY                 -6                -4

     CURRENT JOB OPENINGS              39                 2

     EXPECTED CREDIT CONDITIONS        -7                -2

     NOW A GOOD TIME TO EXPAND         23                 1

     EARNINGS TRENDS                   -8                 1

     TOTAL CHANGE                   108.1                 

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

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