A surge in small business optimism that began late last year has shown sustainability, with entrepreneurs remaining encouraged about the state of the economy in March.
That’s according to data in the National Federation of Independent Business’ Small Business Economic Trends Report, released by the group today.
“Small business owners remain optimistic about the future of the economy and the direction of consumer confidence,” said NFIB President and CEO Juanita Duggan. “We are encouraged by signs that optimism is translating into economic activity, such as capital investment and job creation.”
The Index slipped 0.6 points in March to 104.7 — still a robust reading. Actual earnings, capital expenditure plans, and job-creation plans posted gains in March. Sales expectations, which have been flying high for months, dropped by 8 points, a sign that the Optimism Index could be moderating after a strong run.
“By historical standards, this is an excellent performance, with most of the components of the Index holding their gains,” said NFIB Chief Economist Bill Dunkelberg. “The increases in capital expenditure plans and actual earnings are signs of a healthier economy, and we expect job creation to pick up in future months.”
Still, 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 repealing and replacing Obamacare. A big reason for the soaring optimism of the past five months is the expectation among small business owners that Obamacare and other burdensome policies will be reversed by Congress and the new administration.
“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. “We know they have struggled under Obamacare, and that taxes are a major concern. Congress’s failure to keep its promises could dampen optimism, and that would ripple through the economy.”