12/12/2006
CONTACT: Melissa Sharp, (202) 554-9000
| Optimism Components | Net % | Change |
| Plan to increase employment | 19 | +3 |
| Plan to increase capital outlays* | 31 | 0 |
| Plan to increase inventories | 0 | -4 |
| Expect economy to improve | 11 | 0 |
| Expect higher real sales | 21 | +4 |
| Current inventory | -6 | -3 |
| Current job openings* | 22 | -5 |
| Expected credit conditions | -5 | +1 |
| Now a good time to expand* | 17 | -3 |
| Earnings trends | -18 | -4 |
| *Note: These components are measured as actual percentages of all respondents and are not net percentages. A net percentage is the percent positive minus percent negative. | ||
WASHINGTON, D.C.— Fewer job openings, lower profit gains and fading inventory investment trimmed the National Federation of Independent Business Small-Business Optimism Index a point to 99.7 in November (1986=100). Although job openings declined five points to 22 percent, that component of the index remained at historically high levels, and job-creation plans climbed while inflationary pressures edged slightly upward.
More than half of the owners surveyed hired or tried to hire one or more employees, unchanged from October, but still one of the highest expansion readings. Eight of 10 owners reported few or no qualified applicants for unfilled positions, and average employment increases were weaker than October. A net 12 percent said availability of qualified labor was their top business problem, down three points.
With the exception of the "dot com" boom, the survey indicated the highest job-creation level in its history: during the next three months, 18 percent plan to create new jobs, while only 6 percent plan reductions, yielding a seasonally-adjusted net 19 percent (net 12 percent seasonally unadjusted) planning to create new jobs. Job-creation plans are positive in all industries.
Weaker sales, fewer price hikes and increases in worker compensation drove the net-percent of firms reporting earnings improvements down four points to a minus 18 percent. A net one-fourth raised worker compensation, up two points from October.
Of the 21 percent reporting higher earnings, nearly two-thirds cited stronger sales and 5 percent each credited lower materials costs, higher selling prices and regulatory costs. Thirty-seven percent had lower earnings compared to the previous three months. Of those, 38 percent blamed weaker sales, 16 percent cited higher energy costs, 8 percent noted lower sales prices, 5 percent pointed to more expensive insurance and 3 percent each claimed their taxes and regulatory costs, respectively, were higher.
Inventory accumulation, seasonally adjusted, remained flat in November. A net-negative 6 percent of owners reported stocks too low, three points worse than October.
Unadjusted, construction firms having gains grew five points to 11 percent (many small contractors are involved in home repair and/or remodeling), while 17 percent reported reductions, reflecting liquidation of an excess supply of new homes and related reductions in materials.
Sales gains were noted by 30 percent while 27 reported lower sales, producing a seasonally adjusted net 0 percent of all firms with higher sales in the most recent three-month period. In construction, nearly two-fifths boasted higher sales; 24 percent said the opposite, suggesting that liquidation is in process.
Expected real-sales volumes rose an additional four points to a net 21 percent, seasonally adjusted. Overall, indications are that inventories are still too high. The share intending to increase stocks fell four points to a net 0 percent, seasonally-adjusted. Excessive current holdings are viewed as adequate.
Capital-spending plans held at 31 percent of owners. The frequency of capital outlays over the past six months fell five points to 57 percent. Forty-two percent made new equipment purchases, 21 percent added vehicles, 16 percent improved or expanded facilities, 13 percent bought new fixtures and furniture and 5 percent acquired new buildings or land.
Seventeen percent see the current period as a good time to expand facilities, down three points and consistent with the lower frequency of reported capital expenditures.
"Although spending plans have not changed, the incidence of actual outlays faded, indicating relatively less capital spending support for Gross Domestic Product growth in the fourth quarter," said NFIB Chief Economist William Dunkelberg. A net 11 percent expect business conditions to improve during the next six months, unchanged from October.
"Those expecting higher-real sales climbed four points to a net 21 percent, indicating expectations of less excess capacity than currently exists, which should boost outlays," Dunkelberg said.
After six months of good inflation news, pricing activity firmed. The net percent of firms raising average selling prices rose one point to 17 percent, seasonally adjusted. Unadjusted, 28 percent reported raising average selling prices, up three points, and 13 percent reported lower selling prices, up one point.
Borrowing activity was little changed in November. Only 3 percent cited the cost and availability of credit as their primary business problem.
NFIB's Small Business Economic Trends is a monthly survey of small-business owners' plans and opinions. Decisionmakers at the federal, state and local levels actively monitor these reports, ensuring that the voice of small business is heard. The NFIB Research Foundation conducts some of the most comprehensive research of small-business issues in the nation. The National Federation of Independent Business is the nation's largest small-business advocacy group. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its 600,000 members in Washington and all 50 state capitals.
