US: Small business optimism declines modestly - Wells Fargo

The NFIB Small Business Optimism Index fell 2.6 points to 104.9, with many components falling back slightly from series highs explained analysts at Wells Fargo. They see that staffing challenges remain a major issue and more firms intend to boost pay.

Key Quotes: 

“The National Federation of Independent Business (NFIB) Small Business Optimism Index slipped 2.6 points from its record high in November. While Small Business Optimism fell, the NFIB noted the average for the year was the highest on record. December’s drop still seems a bit odd, coming in the month that tax reform was finally enacted. We doubt the drop reflects an appraisal of tax reform, as many business owners were likely trying to determine how the new law would affect them when the survey was taken.”

“Expected real sales, earnings trends and plans to increase employment all fell during the month. On the plus side, the proportion of small business owners reporting an increase in sales jumped 14 points during the month, a finding that is consistent with reports of strong sales during the holiday season.”

“While hiring at small businesses appears to have remained strong in December, the share of firms planning to hire additional workers fell 4 points to 20 percent. The proportion of firms reporting job openings rose 1 point to 31 percent and a record 54 percent of small business owners noted that they received few or no qualified applicants for their job openings.”

“The continued difficulty small businesses are having staffing is pulling wages higher. The proportion of firms planning to raise compensation remained unchanged at 27 percent, which is the highest this series has been in 28 years.”

“Small business optimism remained near its series high over the past year, reflecting less concern about burdensome regulations and hopes for meaningful tax reform. Now that tax reform has become reality, we would expect businesses to move forward with expansions.”