US NFIB Survey: May Optimism Index +1.5 to 105.0 - Text

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

of Independent Business' monthly Small Business Optimism index published

Tuesday:

     Small business optimism eclipsed pre-shutdown levels, increasing 1.5 points

to 105.0 in May. Six components in the Small Business Optimism Index improved,

three were unchanged, and one dipped. Capital spending plans increased along

with actual outlays. Small business owners' expectations for sales, business

conditions, and expansion all rose, as the previously reported inventory

imbalance was resolved. Earnings, job creation, and compensation remained very

strong.

     "Optimism among small business owners has surged back to historically high

levels, thanks to strong hiring, investment, and sales," said NFIB President and

CEO Juanita D. Duggan. "The small business half of the economy is leading the

way, taking advantage of lower taxes and fewer regulations, and reinvesting in

their businesses, their employees, and the economy as a whole."

     Business owners reporting capital outlays increased six points to 64

percent, the highest reading since February 2018. Thirty percent plan capital

outlays in the next few months, up three points and historically high. Plans to

invest were most frequent in transportation (45 percent), manufacturing (39

percent), professional services (39 percent), and construction (31 percent).

     "Small business owners are demonstrating a continued confidence in the

strength of the economy and are betting capital spending dollars on it," said

NFIB Chief Economist William Dunkelberg. "This solid investment performance is

supporting ongoing improvements in productivity and real wages."

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

nominal sales in the past three months, unchanged from April and historically

strong. The net percent of owners expecting higher real sales volumes rose three

points to a net 23 percent of owners. A net 16 percent expect better business

conditions, up three points, and 30 percent say now is a good time to expand, a

five-point increase. The frequency of reports of positive profit trends improved

two points to a net negative one percent, a very solid gain.

     The net percent of owners reporting inventory increases was unchanged at a

net two percent (seasonally adjusted), consistent with the significant build up

in the first quarter that added nearly one point to GDP growth. The net

percentage of owners viewing current inventory stocks as "too low" was unchanged

at a net negative four percent. The net percentage of owners planning to expand

inventory holdings was unchanged at a net two percent, indicating the excessive

inventory build in Q1 has been substantially resolved overall, helped by strong

sales gains.

     Inflation pressures remained subdued, even though reports of compensation

gains remained at historically high levels. The government reported a

substantial improvement in productivity and an associated decline in unit labor

costs which offsets the need to increase prices to cover rising labor costs. The

net percentage of owners raising average selling prices fell three points to a

net 10 percent, seasonally adjusted. A net 20 percent plan price hikes,

seasonally adjusted (down one point).

     As reported in the May NFIB Jobs Report, small business owners added a net

addition of 0.32 workers per firm, with 25 percent citing the difficulty of

finding qualified workers as their Single Most Important Business Problem,

matching the record high. Sixty-two percent of owners reported hiring or trying

to hire employees, up five points from last month, but 54 percent reported few

or no qualified applicants for the positions they were trying to fill (up five

points)

     Optimism Components:        Seas Adj Level %     Change

     PLANS TO INCREASE EMPLOYMENT      21                 1

     PLANT TO MAKE CAPITAL OUTLAYS     30                 3

     PLANS TO INCREASE INVENTORIES      2                 0

     EXPECT ECONOMY TO IMPROVE         16                 3

     EXPECT RETAIL SALES HIGHER        23                 3

     CURRENT INVENTORY                 -4                 0

     CURRENT JOB OPENINGS              38                 0

     EXPECTED CREDIT CONDITIONS        -5                -1

     NOW A GOOD TIME TO EXPAND         30                 5

     EARNINGS TRENDS                   -1                 2

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

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