Trade fears don’t impact small business optimism

Written on Jun 14, 2019

Small businesses were more optimistic in May than they’ve been since the government shutdown, a key indicator found, defying much of the economic uncertainty that has whipsawed markets.

The National Federation of Independent Business (NFIB) reported on June 11 that its Small Business Optimism Index rose 1.5 points to 105.0 during the month.

That gain took the benchmark to its highest levels since before the spending fight that shuttered the federal government for more than a month late last year.

According to the NFIB, the index saw improvement in six of its 10 components, with three unchanged and only one dip.

“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,” she added.

Capital spending plans and outlays increased 3 points, for a net total of 30%, and small business owners’ expectations for sales, business conditions and expansion improved by 3 points or higher.

Earnings, job creation and compensation also remained strong. Small business owners added to headcount, and 62% of owners are hiring or trying to hire new employees, according to the NFIB.

The most common investments were in transportation (45%), manufacturing (39%), professional services (39%) and construction (31%).

The data comes as major stock benchmarks have been on a wild roller coaster ride, with the U.S. embroiled in a multi-pronged trade war with its biggest trading partners.

Additionally, a weak read on U.S. jobs creation last month also spooked investors — and stoked speculation of an interest rate cut by the Federal Reserve. However, small businesses appear undaunted.

“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 in the NFIB report.

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