Economy Watch: Small Business Optimism Still Strong

Since last November, small business owners have been feeling confident about their prospects, which could lead them to take on more office and industrial space as they expand, according to the National Federation of Independent Business' latest economic trends report.
Source: NFIB March 2017 Report, Small Business Optimism Index
Source: NFIB March 2017 Report, Small Business Optimism Index

The surge in small business optimism that began in November of last year was sustained in March, according to the National Federation of Independent Business’ Small Business Economic Trends Report, which was released on Tuesday. Optimistic small businesses tend to hire more people, and they tend—in the aggregate—to take more office and industrial space when in an expansion mode.

The index slipped 0.6 points in March to 104.7, but that’s still a very strong reading, according to NFIB Chief Economist Bill Dunkelberg. Actual earnings, capital expenditure plans and job-creation plans posted gains in March. Sales expectations, which have been high for months, dropped by 8 points, a sign that the Optimism Index could be moderating after a strong run.

Dunkelberg noted that while the overall index remained strong in March, a significant increase in the Uncertainty Index—a subset of data on how small business owners see the near-term future—could indicate trouble on the horizon. “The Uncertainty Index hit 93 in March, which is the second-highest reading in the survey’s history,” he said. “More small business owners are having a difficult time anticipating the factors that affect their businesses, especially government policy.”

Most of the March data were collected before Congress failed to pass a bill to repeal the Affordable Care Act. “The April data, due out in May, will tell us much more about how small business owners are processing the events in Washington,” said Duggan.