A Review of the NFIB’s June 2014 Small Business Economic Trends Report
The National Federation of Independent Business (NFIB) has collected quarterly and monthly surveys from its membership files for over a quarter-century, and the results are usually pretty telling of the economic landscape and sentiment of small business owners across the U.S.
Small businesses are hiring! May was the 8th positive month in a row for increasing employment in small business. According to the NFIB, this is the best string of gains since 2006. In fact, 55 percent of business owners surveyed hired or attempted to hire in the last three months. And we can hopefully expect to see this trend continue. The report shows that job creation plans continued to strengthen and have almost reached “normal” levels for a growing economy.
Sales are improving. Even though the net percent of all business owners reported higher nominal sales in the past three months when compared to the prior three months, overall sales are at a negative one percent. Still, this is a million times better than the negative 34 percent seen in 2009.
Business owners expect sales to continue to improve. Fifteen percent of business owners except improved sales volumes, increasing five points to the best reading since mid-2007.
There’s no real sense of urgency in stocking up on inventory. Despite an increased expectation of sales volumes, this surprisingly has not translated into a strong demand for inventory or employees, for that matter. The total percent of business owners who were planning to add to inventory fell two points, to one percent. This may not sound like the best news if you are a manufacturer or supplier, but if sales volumes improve as expected, this is likely to change in the near future.
Business owners are being cautious about their spending. This one really isn’t that surprising. While May spending was a little weaker than it was in April, it was still pretty typical of recent findings. According to the report, “[business] owners can’t seem to find reasons to boost spending out of ‘maintenance mode.’”
The future looks bright for business. Even though there has been limited movement in the needle as of yet, overall, small business owners are hinting at better business conditions and sales prospects. In fact, the net percent of owners expecting better business conditions in six months’ time rose to a net 0 percent, which is a nine points better than April numbers and 18 points better than March. This is definitely moving in the right direction.
Access to business credit is still a problem. Thirty-one percent of those surveyed identified themselves as borrowing finances on a regular basis, and of these business owners, six percent reported that small business loans were “harder to get” when compared to their last attempt. The percentage of business owners that reported that all their credit needs were not met remained unchanged at five percent, one point over the record low. Fifty-three percent of owners surveyed said that they did not want a loan.
While the needle is definitely moving in the right direction in many of these areas, according to the NFIB “virtually all of the gain came in expectations for sales and for businesses, [but] the real spending/hiring components collectively lost 1 point.” But, if the gain in expectations translates to actual business decisions in the coming months, the gains in the Index can be looked at as indicators of an economy on the brink of growth. However, there have been quite a few instances over the past few years where the optimism index has seen similar gains that didn’t pan out. Only time will tell if the U.S. economy and small businesses are set to grow.