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NFIB: Small Business Optimism Up Slightly

Date: Aug 15, 2014 @ 07:02 AM
Filed Under: Economic Commentary

July’s Optimism Index technically rose 0.7 points to a reading of 95.7. There was little change in the 10 Index components other than outlook for expansion and business conditions which accounted for the small gain in the Index. Even though these improved, they still remain historically low.

“On the positive side expectations for business conditions and outlook for expansion accounted for virtually all of the net gain in July’s Index,” said NFIB chief economist Bill Dunkelberg.

“However, capital spending reports continue to remain mediocre, spending plans are weak, and inventories are too large, with more owners reporting sales trends deteriorating than improving. As long as these stats continue to hold, the small business half of the economy will continue to not be able to pull its weight.”

Selected July Indicators:

    Sales.  The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months fell 1 point to a net negative 3 percent,  still one of the very best readings since 2007. Thirteen percent cited weak sales as their top business problem, one of the lowest readings since December, 2007, the peak of the expansion. Expected real sales volumes posted a 1 point decline, falling to a net 10 percent of owners expecting gains.

    Credit Markets. Six percent of the owners reported that all their credit needs were not met, unchanged and only 2 points above the record low. Thirty percent reported all credit needs met, and 52 percent explicitly said they did not want a loan. Only 2 percent reported that financing was their top business problem compared to 22 percent citing taxes, 22 percent citing regulations and red tape and 13 percent citing weak sales.

The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative 5 percent; more owners expect that it will be “harder” to arrange financing than easier (a 2 point improvement). This is the most favorable reading about credit market conditions since 2006, occurring at a time when the Fed is terminating its aggressive QE3 policy.

To read the full NFIB press release, click here.

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