Small business owner confidence improved modestly last month, according to a new report from the National Federation of Independent Business (NFIB). Specifically, the headline index ended February at 101.7, a smaller rebound than anticipated following the largest decline in optimism since 2015. Although the sentiment gauge is now at the 2nd-lowest level recorded in the past two years, it remains at a historically healthy reading that is consistent with continued growth.
Further, five of the ten main components that make up the confidence index firmed in February, with notable improvements seen in owners’ outlook for the overall economy and reported plans to make capital outlays. One negative in this survey appears to be the number of owners citing plans to increase employment in the coming months, which fell in February to the lowest reading in nearly a year. However, the decline is a lot less concerning given that job creation at NFIB-member small businesses jumped to an all-time high last month. An elevated percentage of surveyed owners still reported having job openings that they could not fill, but the uptick in hiring suggests that many more firms, even if just temporarily, had an easier time filling vacancies.
Moreover, complaints about finding skilled workers and overall labor quality decreased in February, which in turn helped alleviate some of the upward pressure on compensation. Although likely short-lived, that is a welcome reprieve since other input costs have risen for many small businesses recently, especially those firms more sensitive to tariffs. In fact, when surveyed owners were asked if recent trade policies had impacted their businesses, 28 percent replied “somewhat negatively” and 9 percent cited a “significant negative effect.” The report’s authors added that “Tariffs are mostly paid by consumers, as these costs work their way through supply chains to the final purchaser. The hope is that these costs will be investments in reformed trading arrangements.”
Sources: Econoday, NFIB
Post author: Charles Couch