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Small-biz optimism edges upward
WASHINGTON (1/15/14)--A measurement of small business health improved slightly at the end of 2013, according to the National Federation of Independent Businesses.

The trade association's Small Business Optimism Index advanced by 1.4 points in December to end the year at 93.9. The measurement indicates that while small business' outlook has recovered from the partial government shutdown in October, many entrepreneurs have yet to reap the full benefits of the recovery.

The components of the index gauging optimism drove the overall measure's expansion. The percentage of respondents who said the economy will deteriorate over the next half-year was down by 9 points, while the percentage who said sales will strengthen over the next quarter was up by 5 points. The percentage of firms reporting plans to make capital outlays in the next three to six months was up by 2 points, while the proportion of companies planning to shrink inventories also dropped by 2 percentage points.

The proportion of firms reporting weaker sales over the past quarter remained steady, as did those reporting at least one "hard to fill" job opening. Hiring in December, as measured by the survey, was up by a net 0.24 workers per firm.

Components pulling the index down were the share of firms that reported weaker profits--up by 2%--and the net number of firms who said they planned on hiring within 3 months--down by 1%.
The overall NFIB index ended December at its highest level since September and up by 5.9 points on an annual basis (Economy.com Jan. 14).

Fewer firms are bemoaning weak sales, with 14% citing the issue as their top business problem--the lowest proportion since June 2008. One quarter of companies plan on raising average prices in the next few months, with only 3% planning on decreasing prices.

The NFIB did warn that, on an unadjusted basis, 16% of firms reported higher quarterly profits while 37% of firms reported profit deceleration--an indication, the trade association said, that the economy "remains bifurcated" with "large firms doing fairly well [and] small businesses showing little growth or improvement."

"There are many threats to improvement, including the majority of respondents feeling the current climate is not 'a good time to expand substantially,'" NFIB chief economist Bill Dunkelberg said in a press release. Citing political turmoil over healthcare reform and fiscal issues, Dunkelberg said that "the uncertainty that has contributed to our slow recovery is clearly still present--making any advances shaky at best."
 
According to Moody's, however, overstocked inventories are weighing heavily on small-business sentiment. The research and ratings firm noted that Conference Board, University of Michigan and New York Federal Reserve Bank surveys on consumer confidence indicate that firms' bottom lines should improve throughout 2014. Manufacturing growth and the housing recovery also appear to both be accelerating, the firm remarked.


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