Small Business Optimism Set a Record in 2017
For 45 years the National Federation of Independent Business’s Optimism Index has sought to quantify how small business owners feel about the future. If the NFIB’s latest report is any indication, things are certainly looking rosy. In fact 2017 now ranks as the best year on record according to the index, with the monthly average coming in at 104.9. This figure bests the previous high of 104.6 set in 2004.
Part of the optimism felt by small business owners came from the recently-passed GOP tax plan. As NFIB President and CEO Juanita Duggan explains, “With a massive tax cut this year, accompanied by significant regulatory relief, we expect very strong growth, millions more jobs, and higher pay for Americans.” Moreover Bill Dunkelberg, the NFIB’s chief economist, said, “We’ve been doing this research for nearly half a century, longer than anyone else, and I’ve never seen anything like 2017. The 2016 election was like a dam breaking. Small business owners were waiting for better policies from Washington, suddenly they got them, and the engine of the economy roared back to life.”
Although 2017 still managed to break the monthly average record, small business optimism was actually slightly down in December. The overall index was down 2.6 points from November (falling to 104.9 from 107.5), declines occurred in five survey components with two others seeing gains and three remaining unchanged. Specifically the largest declines occurred in “Expect Economy to Improve” and “Plans to Increase Inventory,” which fell 11 and 8 points respectively. Additionally, as an NFIB jobs report highlights, there is currently a shortage of qualified workers. As a result many small business owners report increasing wages to attract or retain top talent.
In all, it would seem that the majority of small business owners are happy with the Trump presidency from an economic and regulatory standpoint. However, given the highs the NFIB Small Business Optimism index reached in 2017, it will be interesting to see if excitement has now plateaued (as falling December figures might indicate) or whether 2018 can bring another new set of records. Either way, as Dugan concludes, “The lesson of 2017 is that better policies make for better economic result. The evidence is overwhelming that small business owners pay close attention to Washington, and that federal policies affect their decisions on whether to hire, whether to invest, whether to grow inventory, and whether to seek capital.”