Small Business

US small business confidence rises modestly amid sales worries

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U.S. small business confidence edged up in May amid growing concerns about weak sales growth, which are hurting spending on capital goods and inventory investment.

The National Federation of Independent Business (NFIB) said on Tuesday its small business optimism index rose 0.2 point to a reading of 93.8 last month.

Although it was the second straight monthly increase in the index, it remained below the 100 reading in December 2014 and its 42-year average of 98. About 700 small business owners participated in the survey.

Weak spending on capital goods such as machinery, and a slow pace of inventory accumulation, have been a drag on economic growth. Four components of the NFIB index rose last month, while another four fell and two were unchanged.

Worries about anemic sales ranked high among small business owners. Fourteen percent of owners said weak sales were their main business problem, up three points from April.

The share of owners reporting an increase in sales in the past three months fell two percentage points compared to the prior quarter. The share of owners expecting higher sales was unchanged.

Given the pessimism over sales, businesses remained hesitant to increase inventory. There was a decline in the share of owners reporting an increase in inventory as well as those planning to build stocks.

"These weak inventory investment readings are consistent with the rather poor performance of consumer spending in the first quarter, leaving owners with excessive stocks and no incentive to add to them," said the NFIB.

Fifty-eight percent of small business owners reported capital investment, down two points from April. The share of owners planning capital spending in the next 3 to 6 months also fell two points.

Small businesses continued to report difficulties finding qualified workers for open positions. Fifty-six percent of owners reported hiring or trying to hire, up three points, but 48 percent reported few or no qualified applicants for the positions they were trying to fill.

While the share of all owners saying they had job openings they could not fill fell two points, it remained at higher levels. Fifteen percent of owners reported using temporary workers, up two points from April and five points from March.

"Overall, it appears that labor markets are tightening," the NFIB said.