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Market Insights - November 11th, 2020Submitted by Reed Financial Group on November 13th, 2020
Most of the nearly 28 million small businesses are more optimistic, hiring and spending
Small Businesses More Optimistic
The National Federation of Independent Business was founded in 1943 and is the largest small business association in the U.S. The NFIB collects data from small and independent businesses and publishes their Small Business Economic Trends data on the second Tuesday of each month. The Index is a composite of 10 components based on expectations for: employment, capital outlays, inventories, the economy, sales, inventory, job openings, credit, growth and earnings.
Here is what the Small Business Economic Trends data released on November 11th reported:
“The NFIB Optimism Index remained at 104.0 in October, unchanged from September and a historically high reading. Four of the 10 components improved, 5 declined, and 1 was unchanged. Although all of the data was collected prior to Election Day, a 6-point increase in the NFIB Uncertainty Index to 98 was likely driven by the election and uncertain conditions in future months due to the COVID-19 pandemic and possible government-mandated shutdowns. The uncertainty reading was the highest reading since November 2016.”
Further, the NFIB found the following trends:
- Earnings trends over the past three months improved 9 points to a net negative 3% reporting higher earnings.
- Earnings trends have improved to pre-crisis levels, up 32 points since June.
- Inventory investment plans for the next three to six months increased 1 point to a net 12%, a record high.
- Real sales expectations in the next three months increased 3 points to a net 11% expecting gains.
- Owners expecting better business conditions over the next 6 months declined 5 points to a net 27%.
Small Businesses Looking to Hire
As reported the week prior in the NFIB monthly jobs report, small business owners are looking to hire, reporting a historically high level of job openings in October.
- 55% of owners reported hiring or trying to hire in October, down 1 point from September.
- 33% percent of all owners reported job openings they could not fill in the current period, down 3 points from September’s report.
- 23% reported raising compensation and 18% plan to do so in the coming months, up 2 points.
- 8% cited labor costs as their top business problem (down 1 point) but 22% said that labor quality was their top business problem, exceeding taxes, regulations, and weak sales.
- 35% in construction report finding qualified workers as their top issue, slowing new home production.
Small Businesses Spending Money
Of the small business owners spending money:
- 36% of owners reported spending on new equipment (down 2 points)
- 20% acquired vehicles (down 3 points)
- 16% improved or expanded facilities (unchanged)
- 5% acquired new buildings and land for expansion (up 1 point)
- 12% spent money for new fixtures and furniture (up 4 points).
More Data Later This Week
More economic data will be released later this week, including CPI data and Jobless Claims on Thursday and Consumer Sentiment on Friday.