Economy
Small Business Optimism Runs Into Risks on Hiring New Employees
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The National Federation of Independent Business (NFIB) has released its October Small Business Optimism Index, showing that optimism remained at lofty levels. In fact, the index rose to 103.8 from 103.0 in September. It is rather important to consider the mix of these results, because there are some serious issues that may hold back progress ahead, even as the climate for business conditions remains quite high.
As of October, more small business owners forecast that they should have higher sales ahead. More owners also think that now is a good time to expand their businesses.
Business owners, and those who are thinking about opening up a small business, might want to pay attention here. The optimism has already been quite high, and this extends the streak of positive months going back to last November’s election month.
It was interesting that the breakdown of the components was not unilateral. The NFIB showed that four of the index components rose in October, but five components declined and one remained unchanged. Still, the gains were high where there were gains: the outlook for expansion and sales expectations each jumped by six points and job openings increased by five points.
Here are some of the other observations:
On capital spending, the NFIB said:
Fifty-nine percent reported capital outlays, unchanged. Of those making expenditures, 41 percent reported spending on new equipment (up 2 points), 24 percent acquired vehicles (up 1 point), and 16 percent improved or expanded facilities (up 3 points). Seven percent acquired new buildings or land for expansion (up 1 point) and 12 percent spent money for new fixtures and furniture (unchanged). The percent of owners planning capital outlays was unchanged at 27 percent. The recovery from the hurricanes will undoubtedly raise these numbers.
NFIB Chief Economist Bill Dunkelberg said:
Owners became much more positive about the economic environment last month, which suggests a longer-run view. In the nearer term, they are more optimistic about real sales growth and improved business conditions through the end of the year.
Consumer sentiment surged based on optimism about jobs and incomes, an encouraging development as consumers account for 70 percent of GDP. We expect a pickup in auto spending as people in Texas and Florida continue to replace cars that were damaged in the hurricanes. We expect the same increase in home improvement spending, partly because of the hurricanes, but also because of the skyrocketing price of homes.
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