small business

Small-business optimism in U.S. climbs for third month in a row

BLOOMBERG FILE PHOTO/DANIEL ACKER
LAURA MASSAY smiles as she talks to a customer at Beetz Me in Princeton, Ill. Confidence among U.S. small businesses rose in February for the third consecutive month.
Posted 3/12/13

WASHINGTON – Confidence among U.S. small businesses rose in February for a third month as more company leaders said they will invest in equipment and stockpiles.

The National Federation of Independent Business’s optimism index improved 1.9 points to 90.8 last month from 88.9 in January. Eight of the measure’s 10 components increased, the Washington-based group said.

The report also showed respondents remained pessimistic about the outlook for economic growth and earnings, a sign the gains in capital spending and inventories will be slow to develop. The findings follow figures last week that showed the economy added more jobs than forecast last month and the unemployment rate dropped to its lowest level in four years.

“The labor market does seem to be finding better footing,” William Dunkelberg, the group’s chief economist, said in a statement. “But until owners’ forecast for the economy improves substantially, there will not be much of a boost to hiring and spending from the small-business half of the economy.”

Payrolls climbed by 236,000 workers last month after a revised 119,000 gain in January, Labor Department figures showed last week.

Unemployment dropped to 7.7 percent in February, its lowest level since December 2008, from 7.9 percent the month before, the data also showed.

Inventory gauge

Last month’s increase in the small-business index was led by a 6 percentage-point jump in those planning to increase inventories, driving the measure to a net minus one percent. The share planning to make capital outlays in the next three months to six months climbed 4 percentage points, the biggest advance since January 2007, to 25 percent.

Employment prospects at small businesses also improved, as the share of owners saying they planned to create new jobs increased by 1 percentage point to 4 percent. The portion reporting that job openings are hard to fill climbed 3 percentage points to 21 percent.

The net share of small businesses projecting improved economic conditions six months from now was at minus 28 percent, the weakest component of the index. Nonetheless, February’s reading was 2 points higher than in the prior month.

The index of those expecting more lax credit conditions improved by 1 point to a net minus 8 percent, showing that more owners still expect it will be harder rather than easier to get financing.

Net figures

The survey’s net figures are calculated by subtracting the percent of business owners giving a negative answer from those with a positive response and adjusting the results for seasonal variations.

The gauge’s reading of 90.8 compares with a low of 81 in March 2009, according to NFIB monthly data going back to 1986. The index peaked at 107.7 in November 2004.

The NFIB report was based on a survey of 870 small-business owners through Feb. 28.

Small companies represent more than 99 percent of all U.S. employers, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise with no more than 500 employees.

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