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Small Business Optimism Up for Sixth Straight Month: Survey

Optimism among small business owners may be increasing at a “glacial” pace, but it’s “mostly headed in the right direction.”

That’s according to William Dunkelberg, chief economist of the National Federation of Independent Business and keeper of the Small Business Optimism Index. The latest survey of 819 NFIB members showed indications that small business owners are starting to spend, and could even ramp up hiring in some sectors over the next few months.

Respondents to the February survey expressed optimism about their expectations for higher real sales, an increase in inventories and positive earnings; these three things taken together helped push the index up 0.4 percent, to 94.3, the sixth straight increase in the monthly index.

“For small businesses, profits are the only thing that makes them grow; they don’t sell stock,” Dunkelberg told CNBC.com. “So it’s good to see earnings improvement that will finance things like capital spending.”

Inventories have decreased for many business owners in the past month — 20 percent of respondents reported reductions — which is good news for an economy that needs spending to make it grow. “It means businesses will order more inventory, and that’s important,” said Dunkelberg. “That’s more spending.”

Capital outlays, too, are being planned, according to the survey. “The capital spending number keeps going up,” he noted. “It’s the highest we’ve seen in years.” While still far from normal, he said, “Even if it’s just to fix a leaky roof, business owners’ capital expenditures are rising.”

In the past month, more business owners also added workers — 12 percent of owners added 3.4 workers per firm — prompting Dunkelberg to note that it “looks like some real job creation.”

Despite the positive indicators, he said there’s a long way to go before business owners are feeling really secure.

“Six months of increases is good, but we’re still below where we were a year ago,” he explained, pointing to the fact that the index, currently at 94.3, was higher in February 2011 (at 94.5); it took a precipitous drop in August 2011 and has been slowly improving since then.

The November elections, as well as the uncertainty surrounding health-care reform, are causing some business owners to remain on the sidelines, said Dunkelberg, waiting to see the outcome of both before committing to spending and expansion. “There is a lot of political uncertainty between now and November,” he said.

Still, the trend, at least for now, is upward. And for many business owners, even a slow improvement is better than movement in the other direction.

Email us at SmallBiz@cnbc.com
Follow us on Twitter @SmallBizCNBC

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