The May NFIB Small Business Optimism report was released today, June 9, 2015. The headline of the Small Business Economic Trends report is “Small Business Optimism Rises In May, Yet Nothing To Write Home About.”
The Index of Small Business Optimism increased 1.4 points in May to 98.3.
Here are some excerpts from that I find particularly notable (but don’t necessarily agree with):
The Index of Small Business Optimism increased 1.4 points to 98.3 in spite of 5 months of lousy growth. May is the best reading since the 100.4 December reading but nothing to write home about. The 42 year average is 98.0, a bit lower than the 99.5 average through 2007. Eight of the 10 Index components posted improvements. Overall, the Index remained in a holding pattern, a few points below the pre-recession average, although at the 42 year average, and showing no tendency to “break out” into a stronger pattern of economic growth.
Small businesses posted another decent month of job creation in May, a string of 5 solid months of job creation. On balance, owners added a net 0.13 workers per firm over the past few months. Fourteen percent reported raising employment an average of 2.7 workers per firm while 12 percent reported reducing employment an average of 3 workers per firm. Fifty-five percent reported hiring or trying to hire (up 2 points), but 47 percent, reported few or no qualified applicants for the positions they were trying to fill. Thirteen percent reported using temporary workers. Twenty-nine percent of all owners reported job openings they could not fill in the current period, up 2 points, revisiting the February reading, and the highest reading since April 2006.
INVENTORIES AND SALES
The seasonally adjusted net percent of all owners reporting higher nominal sales in the past 3 months compared to the prior 3 months rose a stunning 11 points to a net 7 percent. Eleven percent cited weak sales as their top business problem (unchanged). Expected real sales volumes posted a 3 point decline, falling to a net 7 percent of owners expecting gains, after a 5 point decline in January and February, a 2 point decline in March and a 3 point decline in April. Overall, expectations are not showing a lot of strength.
The net percent of owners reporting inventory increases fell 4 points to a net negative 5 percent (seasonally adjusted). The net percent of owners viewing current inventory stocks as “too low” improved 1 point to a net 0 percent. The reductions were apparently a result of unexpectedly strong improvement in sales trends, and left balance in the assessment of current stocks. The net percent of owners planning to add to inventory was unchanged at a net 4 percent, in sympathy with the more widespread reduction in stocks. Inventory investment might have been even stronger in light of the liquidation had expectations for real sales gains improved rather than softened.
Here is a chart of the NFIB Small Business Optimism chart, as seen in the June 9 Doug Short post titled “Small Business Optimism Rises: Best Reading Since December“:
Further details regarding small business conditions can be seen in the full May 2015 NFIB Small Business Economic Trends (pdf) report.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 2082.66 as this post is written