June 11 – For the third month in a row, a leading indicator of small-business growth rose again in May, although its pace still suggests expansion plans could go either way.
The NFIB Optimism Index, from the National Federation of Independent Business, rose 1.4 points in May to 96.6. That’s the highest reading since September 2007. However, the Index is still far below readings that have normally accompanied an expansion.
“May’s numbers bring the Index to its’ highest level since September 2007,” said NFIB chief economist Bill Dunkelberg. “However, the four components most closely related to GDP and employment growth (job openings, job creation plans, inventory and capital spending plans) collectively fell 1 point in May. So the entire gain in optimism was driven by soft components such as expectations about sales and business conditions.
“With prices being raised more frequently in response to rising labor and higher energy costs, it is clear that small businesses are unwilling to invest in an uncertain future,” Dunkelberg said. “As long as this is the case the economy will continue to be “bifurcated”, with the small business sector not pulling its historical weight in the GDP numbers.”
Five Index components improved, one was unchanged and four fell. See details at NFIB.com.