Small Business Optimism Index Rose to 34-Year High in May

The NFIB Small Business Optimism Index grew to 107.8, 3.0 points above April’s reading. This was the second highest reading in the index’s 45 year history and just below the record level (108.0) reached in 1983. Eight of the ten index components rose in May, while one declined. Thirty-four percent of business owners surveyed said the next three months was a good time to expand, seven points lower than last month’s reading.

Reported job creation grew one point, as 58 percent of businesses reported hiring or trying to hire. However, 48 percent reported few or no qualified applicants for the positions they were trying to fill. Twenty-three percent of employers surveyed cited the difficulty of finding qualified workers as their top business problem. A seasonally adjusted net 18 percent of owners plan to create new jobs, up two points from last month.

Seasonally adjusted, the net percent of owners expecting better business conditions increased seven points to 37 percent. The percent of owners reporting higher sales in the past three months compared to the prior three months was a net 15 percent, up seven points from April. Seasonally adjusted, the net percent of owners expecting higher real sales volumes rose ten points to 21 percent of owners. Capital spending increased one point as 62 percent of owners reported capital outlays. The percent of owners planning capital outlays in the next 3 to 6 months improved one point to 30 percent.

Credit concerns remained historically low, as just 4 percent of owners reported that all their borrowing needs were not met, unchanged from April. Only 1 percent of business owners surveyed reported that financing was their top business problem, while 17 percent of survey participants listed taxes as their top business problem.

Read the NFIB report.

About Stephen Newton

Stephen Newton is an economic research associate at ABA.