Why Small Business Optimism Looks Stagnant in September 2015
Low Inflation in September Means Continued Sluggish Growth
NFIB Small Business Optimism Index
According to the NFIB (National Federation of Independent Business), the Small Business Optimism Index increased to 96.1 index points in September 2015, compared to its 95.9 level in August. This reading is above the consensus estimate of 95.5. The iShares Russell 2000 ETF (IWM) was down 1.4% as of October 13. The ETF (exchange-traded fund) has risen by 6.9% over the past year as of October 13.
Bill Dunkelberg, the NFIB’s chief economist, announced in a press release that “small business optimism continues to be stagnant, which is consistent with the expected economic growth of about 2.5 percent.” He also stated that “the percent of owners citing the difficulty of finding qualified workers as their most important business problem increased and is now third on the list behind taxes and regulations,” specifying that “this is the highest reading since 2007 and suggests that employers will continue to face wage pressure in order to attract and keep good employees.”
Optimism in small business remains stagnant in September. About 12% businesses plan to create new job opportunities and about 25% plan to undertake capital spending initiatives in September.
Earning trends gain with low-cost inflation
Negative earning trends gained two points in September because lower fuel prices helped to keep cost inflation lower. Meanwhile, credit conditions improved by one point during the same period. Small capitalization companies Tyler Technologies (TYL), Anacor Pharmaceuticals (ANAC), Manhattan Associates (MANH), and CubeSmart (CUBE) have gained by 73.3%, 345.9%, 94.9% ,and 40.2%, respectively, over the past year as of October 13.
When an economy is in dismay, small businesses get impacted due to their size. Similarly, when the economy starts to revive, sentiment among small companies helps to gauge the changing tide. However, considering their size, small businesses are least to influence the overall economic growth in the economy. On top of that, neither high nor low inflation is good for business sentiment and consumer confidence in any economy.
In the next part of this series, we’ll take a look at Germany’s inflation data.
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