NFIB SMALL BUSINESS ECONOMIC TRENDS point rate cut, but in February, the regular course of commerce

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Transcript of NFIB SMALL BUSINESS ECONOMIC TRENDS point rate cut, but in February, the regular course of commerce

  • May 2018

    Index Component Seasonally

    Adjusted Level Change from Last Month

    Contribution to Index Change

    Plans to Increase Employment 21% 2 *% Plans to Make Capital Outlays 26% -2 *% Plans to Increase Inventories 2% -2 *% Expect Economy to Improve 22% 8 *% Expect Real Sales Higher 19% -4 *% Current Inventory -4% -1 *% Current Job Openings 38% 1 * Expected Credit Conditions -1% 3 *% Now a Good Time to Expand 26% -2 *% Earnings Trends -4 -1 *% Total Change 2 100%

    1201 F Street N W

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    N FIB.com

    Based on a Survey of Small and Independent Business Owners

    NFIB SMALL BUSINESS ECONOMIC TRENDS

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    William C. Dunkelberg Holly Wade

    February 2020

    SMALL BUSINESS OPTIMISM INDEX COMPONENTS

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    NFIB Research Center has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since 1986. The sample is drawn from the membership files of the National Federation of Independent Business (NFIB). Each was mailed a questionnaire and one reminder. Subscriptions for twelve monthly SBET issues are $250. Historical and unadjusted data are available, along with a copy of the questionnaire, from the NFIB Research Center. You may reproduce Small Business Economic Trends items if you cite the publication name and date and note it is a copyright of the NFIB Research Center. © NFIB Research Center. ISBS #0940791- 24-2. Chief Economist William C. Dunkelberg and Director of Research and Policy Analysis Holly Wade are responsible for the report.

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    Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Optimism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 10 Credit Conditions . . . . . . . . . . . . . . . . . . . . . . . 12 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Capital Outlays. . . . . . . . . . . . . . . . . . . . . . . . . 16 Most Important Problem . . . . . . . . . . . . . . . . 18 Survey Profile . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Economic Survey. . . . . . . . . . . . . . . . . . . . . . . . 20

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    OPTIMISM INDEX The Optimism Index rose 0.2 points in February to 104.5, a reading among the top 10 percent of all readings in the 46-year history of the survey. Four of the 10 Index components improved and six declined. The NFIB Uncertainty Index fell one point in February to 80. Reports of better business conditions in the next six months improved 8 points, to a net 22 percent. Job openings rose 1 point to 38 percent, 1 point below the record high reading last reached in July 2019. Actual job creation remained elevated in February, as small businesses continued to hire and create new jobs. The net percent raising compensation was unchanged at 36 percent, 1 point below the record high. Almost all of February’s survey responses were collected prior to the recent escalation of the coronavirus outbreak and the Federal Reserve rate cut.

    LABOR MARKETS Strong job creation continued in February, with an average addition of 0.43 workers per firm, adding to a strong 1st quarter of 2020. Finding qualified workers remains the top issue with 25 percent reporting this as their number one problem. Fifteen percent (up 2 points) reported increasing employment an average of 1.6 workers per firm and 2 percent (down 2 points) reported reducing employment an average of 4.9 workers per firm (seasonally adjusted). Fifty-eight percent reported hiring or trying to hire (up 2 points), but 52 percent reported few or no “qualified” applicants for the positions they were trying to fill.

    A seasonally-adjusted net 21 percent plan to create new jobs, up 2 points. Not seasonally adjusted, 28 percent plan to increase total employment at their firm (up 4 points), and 1 percent plan reductions (down 2 points). Thirty-eight percent in construction plan to increase their employment, 0 percent plan reductions (not seasonally adjusted).

    Thirty-three percent have openings for skilled workers (up 3 points) and 11 percent have openings for unskilled labor (down 3 points). Thirty-four percent of owners reported few qualified applicants for their open positions (up 5 points) and 18 percent reported none (down 2 points). Reports of “few or no qualified applicants” were very high in construction (65 percent), manufacturing (53 percent), and retail (52 percent).

    CAPITAL SPENDING Sixty-two percent reported capital outlays, down 1 point from January’s reading. Of those making expenditures, 43 percent reported spending on new equipment (down 2 points), 26 percent acquired vehicles (down 1 point), and 18 percent improved or expanded facilities (up 1 point). Seven percent acquired new buildings or land for expansion (down 1 point), and 13 percent spent money for new fixtures and furniture (down 1 point). Twenty-six percent plan capital outlays in the next few months, down 2 points from January. Plans to invest were strong in manufacturing (35 percent) and construction (35 percent).

    This survey was conducted in February 2020. A sample of 5,000 small-business owners/members was drawn. Six hundred forty-one (641) usable responses were received—a response rate of 12.8 percent.

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    SALES AND INVENTORIES A net 5 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 2 points from January. The net percent of owners expecting higher real sales volumes fell 4 points to a net 19 percent of owners. Actual sales volumes are strong, and owners are a bit more certain of future sales growth.

    The net percent of owners reporting inventory increases rose 1 point from January’s reading to a net 7 percent. The net percent of owners viewing current inventory stocks as “too low” increased to negative 4 percent, a 1 point decline from January. The net percent of owners planning to expand inventory holdings decreased from January by 2 point to a net 2 percent, a solid number. Overall, owners feel that the prospects for growth still justify adding to inventory stocks.

    COMPENSATION AND EARNINGS Attempting to fill open positions, historically high percentages of owners plan to raise worker compensation. Seasonally adjusted, a net 36 percent reported raising compensation (unchanged) and a net 19 percent plan to do so in the coming months. Eight percent cited labor costs as their top problem. Firms will likely continue offering improved compensation to attract and retain qualified workers as the labor market remains highly competitive. If vacancies begin to evaporate, it will be an early sign that business is weakening.

    The frequency of reports of positive profit trends fell 1 point to a net negative 4 percent reporting quarter on quarter profit improvements. Thirty-one percent of those reporting weaker profits blamed weak sales, 28 percent blamed usual seasonal change, 14 percent cited labor costs, 3 percent cited materials costs, and 7 percent cited price changes. For those reporting higher profits, 70 percent credited sales volumes and 15 percent credited usual seasonal change.

    CREDIT MARKETS Two percent of owners reported that all their borrowing needs were not satisfied, down 1 point, matching the record low. Thirty-two percent reported all credit needs met (up 2 points) and 55 percent said they were not interested in a loan (up 1 point). A net 1 percent reported their last loan was harder to get than in previous attempts, down 3 points. Two percent reported that financing was their top business problem (up 1 point). The net percent of owners reporting paying a higher rate on their most recent loan was 3 percent, unchanged. Twenty-eight percent of all owners reported borrowing on a regular basis (down 3 points). The average rate paid on short maturity loans fell 60 basis points to 5.4 percent. Overall, credit markets have been very supportive of small business credit needs and will not likely become an impediment in the near future.

    INFLATION The net percent of owners raising average selling prices fell 4 point to a net 11 percent, seasonally adjusted. Unadjusted, 10 percent (up 3 points) reported lower average selling prices and 21 percent (unchanged) reported higher average prices. Seasonally adjusted, a net 20 percent plan price hikes (down 4 points).

  • The strength of the small business sector (about half of GDP and private sector employment) continues to power economic growth and the record long expansion. Spending and hiring remain historically elevated. Yet