Small Business Optimism Remains Steady in October, but Owners’ Uncertainty Increased

Date: November 10, 2020

The NFIB Uncertainty Index increased to 98, the highest reading since Nov. 2016

WASHINGTON, D.C. (Nov. 10, 2020) – 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.

“Leading up to the presidential election, small businesses continued to focus on stabilizing their businesses but were uncertain about the future economic conditions due to COVID-19 government regulations on all levels,” said NFIB Chief Economist Bill Dunkelberg. “We see solid momentum going into the 4th quarter, and another good quarter could get the GDP back to its 2019 closing levels.”

Other key findings include:

  • 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 six months declined 5 points to a net 27%.

As reported in NFIB’s monthly jobs report, small business owners are looking to hire, reporting a historically high level of job openings in October. Overall, 55% of owners reported hiring or trying to hire in October, down 1 point from September. Thirty-three percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 3 points from September’s report.

Unchanged from last month, a net 23% (seasonally adjusted) reported raising compensation and a net 18% plan to do so in the coming months, up 2 points. Eight percent 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. Thirty-five percent in construction report finding qualified workers as their top issue, slowing new home production.

Fifty-three percent of owners reported capital outlays in the last six months, unchanged from September. Historically, this is a poor performance because it doesn’t boost current GDP and it impairs the future growth in worker productivity and pay.

Of those making expenditures, 36% of owners reported spending on new equipment (down 2 points), 20% acquired vehicles (down 3 points), and 16% improved or expanded facilities (unchanged). Five percent acquired new buildings and land for expansion (up 1 point), and 12% spent money for new fixtures and furniture (up 4 points). Twenty-seven percent plan capital outlays in the next few months, down 1 point from September.

Small businesses have continued to see improvements in foot traffic and sales with a net 6% of all owners (seasonally adjusted) reporting higher nominal sales in the past three months, an improvement of 12 points from September. The net percent of owners expecting higher real sales volumes increased 3 points to a net 11% of owners.

The net percent of owners reporting inventory increases rose 2 points to a net negative 5%. Consequently, the net percent of owners viewing current inventory stocks as “too low” remained at record levels, falling only 1 point to 4%. The net percent of owners planning to expand inventory holdings increased from September by 1 point to a net 12%, a record high. Inventories continue to be low and are being rebuilt as supply chains are restored.

Seasonally adjusted, the net percent of owners raising average selling prices rose 2 points to a net 15%. Unadjusted, 10% (down 1 point) reported lower average selling prices, and 23% (unchanged) reported higher average prices. Price hikes were the most frequent in retail (26% higher, 7% lower) and wholesale (21% higher, 13% lower). Seasonally adjusted, a net 20% plan price hikes (up 3 points). The frequency of average price increases above 10% remained high.

The frequency of positive profit trends rose 9 points to a net negative 3% reporting quarter on quarter profit improvement. Among owners with weaker profits, 52% blamed weak sales, 8% cited usual seasonal change, 7% cited labor costs, and 6% cited lower prices. For owners reporting higher profits, 70% credited sales volumes and 10% cited usual seasonal change.

Three percent of owners reported that all of their borrowing needs were not satisfied (up 1 point), 29% reported all credit needs were met (down 4 points), and 56% said they were not interested in a loan (up 1 point). A net 3% reported their last loan was harder to get than in previous attempts (up 1 point).

Only one percent of owners reported that financing was their top business problem, unchanged from last month. The net percent of owners reporting paying a higher rate on their most recent loan was negative 6%, up 4 points from September, indicating that borrowers are seeing the benefits of low interest rates being passed along in the form of lower loan rates. Twenty-five percent of all owners reported borrowing on a regular basis (up 1 point).

Click here to view the NFIB Small Business Economic Trends Survey.  

About the Small Business Economic Trends  
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the 4th quarter of 1973 and monthly surveys since 1986. Survey respondents are drawn from a random sample of NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in October 2020. For more information about NFIB, please visit  

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