Small business owner confidence cooled in December, according to new data from the National Federation of Independent Business (NFIB). Specifically, the headline optimism index slid to 102.7 last month, and six of the ten main components that make up the sentiment gauge deteriorated. Survey timing, though, might have weighed on the results. For example, the NFIB uncertainty index jumped by 8 points in December despite a handful positive developments, suggesting that many responses were perhaps received in the first half of the month when the “Phase One” trade deal was still in doubt.
Further, Congress later in the month passed a “significant tax addendum to the Tax Cuts and Jobs Act that repealed the dreaded Health Insurance Tax and the Cadillac tax, taxes that would have increased the cost of health insurance, further limiting the ability of small business owners to offer employee sponsored health insurance.” Even if there were no timing quirks, most sub-indices still ended 2019 at historically strong levels consistent with continued business growth, and the two main components of the headline index that actually improved in December were encouragingly the forward-looking gauges of owners’ outlooks for inflation-adjusted sales and the overall U.S. economy. Moreover, the percentage of surveyed owners in December who cited “poor sales” as their single-most important problem declined to just 6 percent. That is the best reading since September 2018 and bodes well for consumer spending. Also of note, the number of respondents citing concerns about taxes and regulation has edged higher recently, a trend that may continue as we near the election.
Sources: NFIB, Wells Fargo