Daily News: January 16, 2014

NFIB: Small Business Optimism Slightly Up in December

Small business optimism ended the year slightly up from November at 93.9, but below the previous three mid-year readings of over 94 and six points below the pre-recession average, according to the latest index from the National Federation of Independent Business (NFIB).

On the positive front, reports of capital spending rose significantly in December, increasing by nine points from November and job creation among NFIB firms was the best since February 2006. Hopefully, the promising NFIB job creation and capital spending numbers for December forecast a better 2014.

Capital Spending: The frequency of reported capital outlays over the past six months surprisingly gained nine percentage points in December, a remarkable increase. Sixty-four percent reported outlays, the highest level since early 2005. The surge in spending, especially on equipment and fixtures and furniture, is certainly welcome and is hopefully not just an end-of-year event for tax or other purposes. This level of spending is more typical of a growing economy.

Credit Markets: Four percent of the owners reported that all their credit needs were not met, unchanged and an historic low. Thirty-two percent reported all credit needs met, and a record high 55% explicitly said they did not want a loan. Only 2% reported that financing was their top business problem compared to 23% citing taxes, 20% citing regulations and red tape and 14% citing weak sales.

“While there has been no sign that a real recovery has begun, we can be encouraged that the economy is at least crawling forward and not heading in reverse,” said NFIB chief economist Bill Dunkelberg. “Some segments of the economy are showing improvement (manufacturing, construction, professional services), but consumer spending, especially on services (70% of consumption), has lagged. Spending on items such as automobiles has certainly increased, however a corresponding rise in hiring has not yet materialized.

To read the full NFIB report click here.