Bloomberg News

Confidence at U.S. Small Companies Climbs to One-Year High

March 13, 2012

Confidence among U.S. small businesses rose in February to the highest level in a year as profits improved, a private survey found.

The National Federation of Independent Business’s optimism index increased to 94.3, the best reading since February 2011 and the sixth consecutive monthly gain, from 93.9 in January, the Washington-based group said today. Its earnings gauge climbed to the highest level since before the recession began.

The pickup in confidence was broad-based as more small companies also said they are boosting wages, anticipating better sales and planning to grow inventories. The data underscore figures last week that showed payrolls climbed and the jobless rate held at a three-year low.

The results are “good news for economy watchers,” William Dunkelberg, the group’s chief economist, said in a statement. Small businesses are “mostly headed in the right direction, just at a glacial pace.”

The gauge averaged 100.6 in the five years before the recession began in December 2007.

A measure of the trend in profits increased five points to net minus 19 percent, the best reading since October 2007, the report showed.

The survey’s net figures are calculated by subtracting the percent of business owners giving a negative answer from those giving a positive response and adjusting the results for seasonal variations.

Less Positive

Last month’s improvement came even as small-company leaders were less optimistic about the economy as a whole. The gauge of expectations for better business conditions six months from now fell three points to net minus 6 percent, and an index of whether firms think this is a good time to expand fell one point to net 8 percent, today’s report showed.

Measures on hiring and investment were also less promising. The small-business gauge of plans to add to payrolls dropped one point to net 4 percent, and those intending to make capital purchases over the next three to six months fell a point, the first decline in five months, to net 23 percent.

The NFIB report was based on 819 survey responses through February 29. Small businesses represent more than 99 percent of all U.S. employers, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise employing as many as 500 people.

To contact the reporter responsible for this story: Shobhana Chandra in Washington schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.


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