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Small Business Optimism Index Soars01-11-17 | Economic News

Small Business Optimism Index Soars

Reaches Highest Level Since 2004

The Small Business Optimism Index of the National Federation of Independent Business has risen more than 14 percent in November and December, a strong sign that business owners are feeling very good about their future prospects with Donald Trump as president. The senior economist for the Wells Fargo Economics Group described the trend as "one of the greatest turnarounds on record."

The collective confidence level of small business owners has "rocketed" to its highest level since 2004, a rising trend that the National Federation of Independent Business (NFIB) has clearly linked to Donald Trump's election as president.

Business owners reacted to the election by driving the Small Business Optimism Index 7.4 points higher in December to a reading of 105.8, fueled largely by a "stratospheric" 38-point jump in the number of owners who said they expect business conditions to improve in the future.

The Index also rose 4.5 points in November.

"We haven't seen numbers like this in a long time," said Juanita Duggan, NFIB president and CEO. "Small business is ready for a breakout, and that can only mean very good things for the U.S. economy."

"The 14.4 percent two-month rise in small business optimism is one of the greatest turnarounds on record," wrote Mark Vitner, senior economist for the Wells Fargo Economics Group.

"Business owners who expect better business conditions accounted for 48 percent of the overall increase," said Bill Dunkelberg, chief economist for the NFIB. "The December results confirm the sharp increase that we reported immediately after the election."

The other two big movers in the survey, "Sales Expectations" and "Good Time to Expand," jumped by 20 percentage points and 12 percentage points, respectively.

"This is the second consecutive month in which small business owners reported a much brighter outlook for the economy and higher expectations for their businesses," Dunkelberg said. "In this month's report, we are also finding evidence that higher optimism is leading to increased business activity, such as capital investment."

Sixty-three percent of respondents made capital outlays, an eight-point increase over November, the NIB reports. Also, the net percent of owners reporting inventory gains increased six points.

"Business owners are feeling better about taking risks and making investments," Duggan said. "Optimism is the main ingredient for economic expansion. We'll be watching this trend carefully over the next few months."