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Expectation for Higher Sales Drives US Small Business Confidence: NFIB

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Expectation for Higher Sales Drives US Small Business Confidence: NFIB

Small business confidence in the United States increased slightly in January, as anticipation of higher sales slightly outweighed concerns over high inventories and weak earnings.

The Business Optimism Index, courtesy of the National Federation of Independent Business, edged up slightly in January from 93.9 to 94.1. Economists in a Reuters poll forecast a narrow drop of 0.3 percentage points to 93.6. The monthly reading suggests business optimism is more or less treading water, except for the huge jump in sales expectations.

Anticipation of higher sales was the biggest factor behind last month’s stronger than forecast reading. Sales expectations surged 7 points in January, the NFIB reported today. This in-turn fueled the strongest staffing plans since 2007.

Although sales expectations and hiring trends improved, Main Street is still cautious about the future. Business owners still say inventories are “too high,” as earnings trends continue to deteriorate. At the same time, job creation remained uneven. More than three-quarters of businesses made no net change in employment. Less than half of all business owners hired or tried to hire in the last three months; among them, 83 percent reported difficulty finding qualified candidates.

“NFIB [labour] market indicators have recently seen a return to normal (but not expansion) levels, encouraging in that reversals are now less likely,” wrote NFIB chief economist Bill Dunkelberg in a statement. “The average increase in workers per firm has also risen in recent quarters, indicating new job creation. However, there are far fewer firms hiring workers than there were in 2007 and many of those still in existence have downsized.”

The US labour market has painted a mixed picture in recent months. Although unemployment declined and labour force participation increased, the pace of job growth was much weaker than forecast. The US economy added 113,000 payrolls last month, following a revised gain of 75,000 in December.

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