November 2018 Small Business Optimism: Declined But Remains Historically High

Compensation and Earnings. Reports of higher worker compensation was unchanged at a net 34 percent of all firms, very strong. Plans to raise compensation rose 2 points to a net 25 percent, the highest since 1989. Owners complain at record rates about labor quality issues, with 87 percent of those hiring or trying to hire in November reporting few or no qualified applicants for their open positions. Twenty-five percent (up 2 points, a record high) selected "finding qualified labor" as their top business problem, more than cited taxes or regulations as their top challenge. The frequency of reports of positive profit trends fell 1 point to a net negative 4 percent reporting quarter on quarter profit improvements, continuing a streak of historically favorable profit reports.

Capital Spending. Sixty-one percent reported capital outlays, up 2 points from October. Of those making expenditures, 45 percent reported spending on new equipment (up 2 points), 22 percent acquired vehicles (down 4 points), and 18 percent improved or expanded facilities (unchanged). Eight percent acquired new buildings or land for expansion (up 2 points) and 15 percent spent money for new fixtures and furniture (up 1 point). Twenty-nine percent plan capital outlays in the next three to six months, down 1 point, but among the strongest readings in the recovery period. Continued strong growth is using up capacity and owners need to replace and expand to meet the demand for their products and services.

Inflation. The net percent of owners raising average selling prices was unchanged at a net 16 percent, seasonally adjusted. Seasonally adjusted, a net 29 percent plan price hikes (up 1 point), the highest since August 2008. A net 38 percent planned price hikes in July 2008 but quickly fell to a net 0 percent 6 months later as the economy plunged into the Great Recession.

source: NFIB

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