February 2018 Nation Federation of Independent Business

Small business confidence is high.  The Small Business Optimism Index improved during February 2018 from an already lofty tally in January.  Reaching 107.6, this is the second highest level in the indicator’s 45-year history.  Only the 1983 record high of 108.0 has been better.

Six of the ten components increased in the period, while three were unchanged and just one declined.  Expectations for higher retail sales improved the most.  Next, a growing number of firms believe their inventory levels are too low, boding well for future output; more companies have started increasing their supplies as well.  Additionally, an increasing number of businesses believe the economy will continue improving.  Earnings trends and the outlook for credit conditions were also more optimistic than a month earlier.  Plans to make capital outlays, the number of respondents thinking “now is a good time to expand,” and current job openings held steady.  The lone decline came from plans to increase employment. 

Jobs were also the subject of another portion of the release.  When asked to identify their number one business problem, 22 percent cited the availability of qualified labor.  This could be a symptom of a fully employed labor force.  That is not to say everybody has a job, but it demonstrates one of our economy’s shortfalls: a gap between labor needs and workers’ skills.

With just a few category exceptions, this release was uplifting.  Small business optimism led the economy’s upturn last year and currently seems to be looking for more growth ahead.  On its own, this indicator is very encouraging.  Atlas will continue watching it with some intrigue as it remains one of the most elevated gauges out there.