Courtesy of Javier E. David, WSJ
Optimism amongst small U.S. businesses rose to its highest level in more than four years in February, data released Tuesday showed, yet business owners remain concerned about future prospects.
The National Federation of Independent Business‘s small-business optimism index rose 0.4 point to 94.3 from 93.9 in January. The February figure was its sixth consecutive monthly increase and its strongest level since December 2007.
Characterizing the report as “a mixed bag, but mostly headed in the right direction,” the NFIB noted improvement in key areas of business activity. Still, the organization stated the headline index remains mired at levels it considers recessionary. While the report noted easier access to credit and growth in capital spending, respondents were also moderately more pessimistic about the outlook.
According to the report, six of the index’s 10 subcomponents lost ground during February.
The subindex of expected business conditions in the next six months fell 3 percentage points to -6% last month, even as earnings trends showed improvement, rising five points to -19%. Meanwhile, the expected higher real sales subindex increased 2 points to 12%.
Gains in hiring among the businesses surveyed by the NFIB have mirrored the broader improvement in the economy, reversing a trend that the organization has often cited as a drag on small businesses. Although firms have yet to add a large amount of jobs, small business employment during the month “looks like some real job creation,” the NFIB said. The new jobs subindex dipped one point to 4%, its best showing since September 2008, while job openings hard to fill also slipped one point to 17%.
The indexes’ two largest increases were due to a rise in inventories–generally considered negative for demand as consumers become more reluctant to spend–and a rise in earnings. The earnings trend index rose five points to -19%, while inventories rose by an equivalent amount, to 2%.
In a sign that small businesses may have regained some pricing power during February, the seasonally adjusted number of firms raising selling prices rose by 1%, up two points from January.