U.S. small business optimism rises in May, NFIB index rises 3.5 points

The U.S. small business optimism rose in May, but remains low. The NFIB Small Business Optimism Index rose 3.5 points to 94.4. It remains well below where it was prior to the outbreak, but the forward-looking components are rebounding as the economy re-opens, noted Wells Fargo in a research report.

The index, which was holding around 105 for the past couple of years, seems to have bottomed in April, in line with an array of high frequency data. With the May recovery, it has now recovered a quarter of the fall since February.

Sales expectations rose 18 points. But it is hard not to increase from such a low base, and most companies still expect sales to decline. Hiring plans rose strongly, in line with the May NFP beat.

“This report is a step in the right direction, but small businesses face a long and arduous recovery, with many likely still at risk”, said Wells Fargo.

The Uncertainty Index also rose in May, owing to fears of a renewed outbreak of COVID-19, uncertainty over changing consumer behaviour and an evolving policy landscape.

The PPP rules keep changing, but they’re getting better, stimulating economic expectations.