Small-Business Index in U.S. Rises to Highest in Five Months
Small-Business Index in U.S. Rises
Andrew Harrer/Bloomberg
Santos Ceron applies paint to a sign at Gelberg Signs in Washington, D.C.
Santos Ceron applies paint to a sign at Gelberg Signs in Washington, D.C. Photographer: Andrew Harrer/Bloomberg
Confidence among U.S. small businesses rose in October to the highest level in five months as more companies projected sales gains and an improving economy, a private survey found.
The National Federation of Independent Business’s optimism index increased to 91.7 from a September reading of 89. Seven of the index’s 10 components rose and three declined. The measure, which averaged 100.6 in the five years before the recession began, has been below 93 since January 2008.
To help broaden the recovery, smaller firms need to increase hiring. A measure of job creation was little changed and capital spending plans declined, signaling a pickup in the world’s largest economy will be slow to develop.
“The private sector will continue to slog ahead,” William Dunkelberg, the group’s chief economist, said in a statement. October’s gain in optimism is “not a huge move, but at least a decent jump, perhaps anticipating an acceleration in economic activity or a change in the ‘management team’ after the election,” he said.
The gauge of expectations for better business conditions six months from now jumped 11 percentage points to 8 percent in October, the report showed.
Hiring Plans
The measure of respondents planning to hire over the next three months rose four points to a net 1 percent, according to the report. Eight percent of businesses said they plan to hire, unchanged from the prior month. Fewer indicated they plan cut staff, with 13 percent anticipating workforce reductions, down 3 points from September.
Average employment growth was unchanged in October, after falling in all but two quarters since April 2007, which “raises the odds that Main Street may contribute to private sector job growth for the first time in over a year,” Dunkelberg said.
A gauge of whether firms think this is a good time to expand increased by one point to 7 percent, while 73 percent said it is not, the survey said.
Plans for capital investment over the next few months fell one point to 18 percent. A net minus 4 percent plan to add to inventories, down one point from September.
The survey’s net figures are calculated by subtracting the percent of business owners giving a negative answer from those giving a positive response and adjusting the results for seasonal variations.
Rising Sales Expectations
The net share of owners projecting higher sales, adjusted for inflation, increased four points to 1 from minus 3 the previous month. The index of earnings trends also increased, by seven points, to minus 26 percent.
Limited demand continued to keep inflation at bay, the survey showed. October was the 23rd straight month that showed more small business owners cutting average selling prices than raising them.
Private payrolls jumped by 159,000 workers in October, more than forecast and the most since April, while the jobless rate held at 9.6 percent, Labor Department figures showed last week. The report showed total payrolls, including government agencies, increased by 151,000 following a revised 41,000 drop the prior month that was smaller than initially estimated.
The NFIB report was based on 1,910 small-business owner respondents through Oct. 31. Small businesses represent more than 99 percent of all U.S. employers and have created 65 percent of all new jobs in the past 17 years, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise employing up to 500 people.
To contact the report on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story; Christopher Wellisz at cwellisz@bloomberg.net
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