U.S. small business confidence index rises in May

The U.S. small business confidence rose in the month of May. The NFIB’s optimism index rose 3 points to 107.8, the second highest reading in the survey’s history. Most the main subcomponents rose in month, apart from a small fall in job openings that continue to be elevated and a flat print in current inventory.

Positive earnings trends came in at a survey high of a net 3 percent, a rise of 4 points, while sales trends saw a rise of 7 points to 15 percent. Improved earnings trend buoyed expectations on future performance, with gains in ‘expectations regarding real sales’ and an ‘improvement in the economy’ leading the charge, noted TD Economics in a research report.

The share of companies recording that now is a good time to grow rose to 34 percent. Plans for expansion followed suit, as plans to increase employment rose 2 points to 18 percent, and capital outlay plans rose 1 point to 30 percent.

The difficulty of finding qualified workers remained the ‘single most important business problem’, cited by 23 percent of firms. The percent of companies raising worker compensation was up 2 points to 35 percent, yet another all-time high, while plans about worker compensation dropped.

Business passed on some of the risen costs down the supply chain. The share of companies planning to do so in the future also rose by 4 points to 26 percent.

The rise in sentiment measure seems to be organically-linked, given rebounded earnings and sales trends, which helps brighten the outlook. This is a solid hint that conditions of the ground continue to be quite favorable, which should allow and encourage small businesses to take necessary steps to grow, stated TD Economics.

“As trade talk springs into action, some small businesses will undoubtedly be caught in the crossfire, which could weigh on the sentiment measure and expansion plans”, added TD Economics.

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