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Confidence at U.S. Small Companies Climbs to Highest Level in Three Years

Confidence among U.S. small companies rose in February to the highest level in three years as hiring and sales expectations increased, a survey showed.

The National Federation of Independent Business’s optimism index climbed to 94.5, the highest since the recession began in December 2007, the Washington-based group said today in a statement. The reading compares with the average 100.7 during the previous expansion that started in November 2001.

Hiring plans rose to the second-highest level since September 2008, a sign employment may pick up in coming months. At the same time, earnings expectations remained negative, and fewer businesses said it was a good time to expand.

“The future is looking brighter for a few more small- business owners,” William Dunkelberg, the group’s chief economist, said in the statement. Still, he said, “this is not a reading that characterizes a strongly rebounding economy.”

Figures on employment turned more optimistic. Small businesses with plans to add to payrolls rose 2 points to a net 5 percent. A net 15 percent of firms in the February survey said they were having trouble filling job openings, the highest level since September 2008.

“Employment in the small-business space is increasing slowly,” Kiran Patel, general manager at the small business group at Intuit Inc., which markets software solutions for small- and medium-sized firms, told a teleconference on March 2. “Things are a lot better today than they were 18 months ago, but we are far from being at the place where we were before the deep recession.”

Sales Outlook

The net percent of small business owners projecting higher sales, adjusted for inflation, rose 1 point to 14 percent, the highest level since September 2007.

The gauge of expectations for better business conditions six months from now fell 1 percentage point to a net 9 percent. An index of whether firms think this is a good time to expand declined by 1 point to 7 percent.

A measure of trends in earnings increased 1 point to minus 27 percent, today’s report showed. Those expecting credit conditions to ease held at a minus 10 percent.

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.

Plans for capital investment over the next few months held at a net 22 percent, while a net 2 percent of small business owners said their inventories were too low, up from zero in the prior month, signaling renewed stockpiling.

Price Cutting Ends

February’s report also signaled the “end of a long period of price cutting,” the statement said, without providing specific numbers. “This signals a return in the months ahead to increases in average prices as supply adjustments restore pricing power.”

The NFIB report was based on 774 survey responses through the month of February. Small businesses represent more than 99 percent of all U.S. employers and have created 65 percent of 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 reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.

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