"Groundbreaking Numbers": Small Business Confidence Smashes Prior High Set Under Reagan

In the latest sign that the Trump administration's economic policies are fueling an economic boom, the National Federation of Independent Businesses reported Tuesday that its gauge of small business optimism had risen in August to its highest level in nearly half a century. Indeed, the headline number climbed to 108.8, reflecting the fact that more small businesses are planning to hire more workers, raise wages or increase capital investment. That shattered the previous record set more than 35 years ago under Ronald Reagan.

"Today’s groundbreaking numbers are demonstrative of what I’m hearing everyday from small business owners – that business is booming. As the tax and regulatory landscape changed, so did small business expectations and plans,” said NFIB President and CEO Juanita D. Duggan. “We’re now seeing the tangible results of those plans as small businesses report historically high, some record breaking, levels of increased sales, investment, earnings, and hiring." said Juanita Duggans, the CEO of the NFIB.

"There is no question that the change of policy in Washington has everything to do with the increase in the optimism index."

A net 10% of all owners reported higher nominal sales in the past three months compared with the prior three months, an increase of two points. Meawhile, August was the ninth consecutive month of reported sales gains after years of low or negative numbers. The net percentage of business owners planning to build inventories rose six points to a record net 10%, marking the 14th positive reading in the past 22 months.

SBOP

Meanwhile, the frequency of reports of positive profit trends rose two points to a net one percent, reflecting quarter-on-quarter profit improvements and marking the second highest such reading in the survey’s 45-year history. In recent years, the index has been dominated by expectations as business owners saw boom times just around the corner. And while small businesses' economic outlook is still high...

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...real business activity now dominates the index, according to the NFIB's chief economist.

"At the beginning of this historic run, Index gains were dominated by expectations: good time to expand, expected real sales, inventory satisfaction, expected credit conditions, and expected business conditions," said NFIB Chief Economist Bill Dunkelberg. "Now the Index is dominated by real business activity that makes GDP grow: job creation plans, job openings, strong capital spending plans, record inventory investment plans, and earnings. Small business is clearly helping to drive that four percent growth in the domestic economy."

The number came in at the high end of economists' expectations, according to BBG. Still, employers continue to struggle to find employees to fill some skilled jobs, as the survey showed. Below, find a roundup of the survey's other findings.

  • 34% of employers think it is a good time to expand
  • Net percentage of employers anticipating job creation rises to 26%
  • Net percentage of firms expecting a better economy falls to 34%
  • Net percentage of firms anticipating higher selling prices rises to 17%
  • Firms seeing increased capital spending rises to 33%
  • Firms planning to boost inventory rises to 10%
  • Net percentage of firms expecting better sales falls to 26%
  • Firms viewing inventories as too low unchanged at -3%
  • Employers with jobs not able to fill rises to 38%
  • Firms seeing easier credit conditions falls to -6%
  • Net percentage of firms expecting positive earnings trends rises to 1%
  • Net percentage of firms with actual compensation changes over the last three months unchanged at 32%
  • Net percentage of firms expecting compensation to grow falls to 21%
  • 680 employers surveyed for the NFIB report

We imagine the president will be weighing in soon to tout this latest indication that his policies are behind the late-cycle boom that we're currently experiencing (even though it comes at the expensive of a blown-out budget deficit).