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The NFIB Small Business Optimism Index fell 2.6 points in November to 101.4, lowest in 7 months but still well above the 47-year historical average reading of 98. 6 of the 10 Index components fell and 4 increased. The NFIB Uncertainty Index fell 8 points to 90, still a historically high reading. Owners expecting better business conditions over the next 6 months declined 19 points to a net 8%.

NFIB optimism Dec 2020

US November NFIB Small Business Optimism index 101.4 v 102.5 

“Small business owners are still facing major uncertainties, including the COVID-19 crisis and the upcoming Georgia runoff election, which is shaping how they’re viewing future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses.”

November Survey Highlights

  • Earnings trends over the past 3 months declined 4 points to a net negative 7% reporting higher earnings quarter over quarter.
  • Inventory investment plans for the next 3 to 6 months decreased 7 points from a 48-year record high of a net 12% in October to a net 5% in November.
  • Finding qualified employees remains a problem for small business owners with 89% of those hiring or trying to hire reporting few or no “qualified” applicants for the positions they were trying to fill.
  • Twenty-seven percent of owners reported few qualified applicants for their open positions and 20% reported none.
  • Six percent of owners cited labor costs as their top business problem (down 2 points), but 24% said that labor quality was their top business problem (up 2 points), exceeding the percentages that selected taxes, regulations, and weak sales as their top problem.
  • Fifty-three percent reported capital outlays in the last six months, unchanged from October’s reading. Of those making expenditures, 38% reported spending on new equipment (up 2 points),
  • 24% acquired vehicles (up 4 points), and 17% improved or expanded facilities (up 1 point).
  • Five percent acquired new buildings or land for expansion (unchanged) and 13% spent money on new fixtures and furniture (up 1 point).
  • Down 1 point from October, 26% of owners plan capital outlays in the next few months.
  • A net 5% of all owners (seasonally adjusted) reported higher nominal sales in the past 3 months, down 1 point from October but holding at the current recovery level.
  • The net percent of owners expecting higher real sales volumes decreased 1 point to a net 10% of owners, a solid reading.
  • Price hikes were the most frequent in retail (28% higher, 4% lower) and wholesale (23% higher. 7% lower).
  • Seasonally adjusted, a net 21% of owners plan price hikes (up 1 point). A net 24% of owners reported raising compensation, and a net 20% plan to do so in the coming months.

 

NFIB Dec 2020

LABOR MARKETS

Labor market indicators remained strong. Thirty-four percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up 1 point from October. Twenty-nine percent have openings for skilled workers (unchanged) and 13 percent have openings for unskilled labor (down 1 point). Firms increased employment by 0.16 workers per firm on average over the past few months, an increase of 0.06 workers per firm compared to October.

Twelve percent (up 1 point) reported increasing employment an average of 2.6 workers per firm and 14 percent (unchanged) reported reducing employment an average of 3.1 workers per firm (seasonally adjusted). Owners have plans to fill open positions, with a seasonally adjusted net 21 percent planning to create new jobs in the next three months, up 3 points from October. Overall, 53 percent reported hiring or trying to hire in November, down 2 points from the previous month. Forty-seven percent (89 percent of those hiring or trying to hire) reported few or no “qualified” applicants for the positions they were trying to fill. Twenty-seven percent of owners reported few qualified applicants for their open positions (down 1 point) and 20 percent reported none (unchanged). Six percent cited labor costs as their top business problem (down 2 points) but 24 percent said that labor quality was their top business problem (up 2 points), exceeding the percentages selecting taxes, regulations and weak sales as their top problem. Planning to Hire Hire Enough Workers Hiring Click images to view

CAPITAL SPENDING

Fifty-three percent reported capital outlays in the last six months, unchanged from October. Of those making expenditures, 38 percent reported spending on new equipment (up 2 points), 24 percent acquired vehicles (up 4 points), and 17 percent improved or expanded facilities (up 1 point). Five percent acquired new buildings or land for expansion (unchanged), and 13 percent spent money for new fixtures and furniture (up 1 point). Twenty-six percent plan capital outlays in the next few months, down 1 point from October.

COMPENSATION AND EARNINGS

Seasonally adjusted, a net 24 percent reported raising compensation (up 1 point) and a net 20 percent plan to do so in the coming months, up 2 points. As strange as this labor market seems with 20 million on unemployment benefits and the unemployment rate double what it was at the beginning of the year, the labor market is tight. The frequency of reports of positive profit trends decreased 4 points to a net negative 7 percent reporting quarter on quarter profit improvement, historically a favorable reading. Among owners reporting weaker profits, 55 percent blamed weak sales, 8 percent cited usual seasonal change, 8 percent cited a higher cost of materials, 6 percent cited lower prices, and 3 percent cited labor costs. For owners reporting higher profits, 73 percent credited sales volumes, 9 percent cited usual seasonal change, and 8 percent cited higher prices.

CREDIT MARKETS

Two percent of owners reported that all their borrowing needs were not satisfied (down 1 point). Twenty-five percent reported all credit needs met (down 4 points) and 58 percent said they were not interested in a loan (up 2 points). A net 2 percent reported their last loan was harder to get than in previous attempts (down 1 point). Credit markets have never been friendlier, and the Federal Reserve promises that will continue indefinitely. One percent reported that financing was their top business problem (unchanged). The net percent of owners reporting paying a higher rate on their most recent loan was negative 4 percent, up 2 points from October. Owners are enjoying the low interest rates supported by the Fed. The average rate paid on short maturity loans was 4.7 percent, down 0.2 points from October. Loan rates have never been so consistently low. Twenty-two percent of all owners reported borrowing on a regular basis (down 3 points).

SALES AND INVENTORIES

A net 5 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 1 point from October but holding at the current recovery level. The plunge in sales was as deep as readings during the Great Recession, but lasted only months, not years. The improvement in sales was unprecedented. The net percent of owners expecting higher real sales volumes decreased 1 point to a net 10 percent of owners, a surprisingly small decline in light of the 19-point decline in the net percent of owners expecting better business conditions.

INFLATION

The net percent of owners raising average selling prices increased 3 points to a net 18 percent, seasonally adjusted. Price hikes have returned to normal levels and there is no surge in the inflation rate anticipated by current price levels. Unadjusted, 8 percent (down 2 points) reported lower average selling prices and 23 percent (unchanged) reported higher average prices. Price hikes were most frequent in retail (28 percent higher, 4 percent lower) and wholesale (23 percent higher, 7 percent lower). Seasonally adjusted, a net 21 percent plan price hikes (up 1 point). No pressure on prices in the near future.

Source: November 2020 Report: Small Business Optimism Index

From The TradersCommunity News Desk

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