NFIB Small Business Optimism Index at 94.5 in June 2016, Outpacing Views (SPY) (UUP)

The Index of Small Business Optimism rose seven-tenths of a point in June to 94.5, a negligible increase showing no real enthusiasm for making capital outlays, increasing inventories, or expanding, according to the National Federation of Independent Business (NFIB).

*** NOTE: Consensus estimates called for a reading of 93.9.

“Small business optimism did not go down, which is good, but small businesses are in maintenance mode experiencing little growth,” said NFIB Chief Economist Bill Dunkelberg. “Uncertainty is high, expectations for better business conditions are low, and future business investments look weak. Our data indicate that there will be no surge from the small business sector anytime soon and prospects for economic growth are cloudy at best.”

At 94.5, the Index remains well below the 42-year average of 98. Four of the 10 Index components posted a gain, three declined, and three were unchanged. The biggest increase was Expected Business Conditions, which rose four points, a good sign, but more owners still expect conditions to be worse than expect improvement. Owners are still reporting that they cannot find qualified workers and cite it as their third “Single Most Important Business Problem.”

Job openings and capital spending plans both increased to “expansion” high readings, but remain historically low for a growth period. Weak capital spending remains one of the main causes for slow GDP growth. And the political climate continues to be the second most frequently cited reason for why owners think the current period is a bad time to expand.

“Calling the current economy an expansion is an absolute oxymoron, said Juanita Duggan, NFIB President and CEO. “Fifty percent of GDP is small business. To grow the economy, policy makers need to get serious about tax reform, over-regulation, and health care costs.”

NFIB’s monthly Small Business Economic Trends survey is based on a monthly survey of small businesses. The survey was conducted in May and reflects the response of 700 small businesses.

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