December 2019 Small Business Optimism Dips

from the National Federation of Independent Business

Small business optimism ended the year historically strong, with a reading of 102.7, down two points from November. Seven of 10 components fell, two improved, and one was unchanged. An increased number of small business owners reported better business conditions and expect higher nominal sales in the next three months.

[editor's note: Market expectation from Econoday was between 103.5 to 106.0 (consensus 104.4) ].

While the frequency of plans to raise compensation fell two points, it remains one of the highest readings in the survey's 46-year history. Small businesses continued to hire and create new jobs with actual job creation matching November's reading, the highest since May.

Said NFIB Chief Economist Bill Dunkelberg:

Tax Cuts and Jobs Act,

Although the NFIB Uncertainty Index rose eight points in November to 80, owners expecting better business conditions increased 3 points to a net 16%. A net 9% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, 3 points above the average reading for 2019. The net percent of owners expecting higher real sales volumes increased 3 points to a net 16% of owners, bouncing back from November's weak reading. Actual sales volumes are strong, and owners are a bit more certain of future sales growth.

The net percent of owners raising average selling prices rose 2 points to a net 14%, seasonally adjusted, continuing a measured upward trend since September. Unadjusted, 10% (up 2 points) reported lower average selling prices and 20% (up 3 points) reported higher average prices.

The current focus and noise in Washington, D.C. around impeachment is having little, if any, impact on small business owners. This is no different than during the Clinton impeachment proceedings. The Index showed little variation over the 1998-99 period that included the pre-impeachment news coverage, the impeachment proceedings, and the aftermath. The initial 2019 path is starting in a similar fashion, albeit at a stronger position.

As reported in last week's NFIB's monthly jobs report, a seasonally-adjusted net 19% plan to create new jobs, down 2 points. Finding qualified workers remains the top issue for small business owners, with 23% reporting this as their number one problem. A net 29 percent, seasonally adjusted, reported raising compensation (down 1 point) and a net 24% plan to do so in the coming months, down 2 points.

Concludes NFIB Chief Economist Bill Dunkelberg:

What really matters to small business owners are issues directly impacting their bottom lines. Currently, their biggest problem is finding qualified labor, surpassing taxes or regulations. Two years ago, Congress and the President provided real, significant tax relief to small business owners. Now owners are anxious to have their tax cuts made permanent.

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