Small Business Optimism Goes Up for 3rd Month in a Row

Confidence among small businesses in the United States increased in February for the third straight month of gains. Company leaders said they are more willing to invest in equipment and inventories. The National Federation of Independent Business’ optimism index gained 1.9 points to 90.8 in February from 88.9 in January. Eight of the measure’s 10 components went up.

The report also indicated respondents maintained their negative outlook towards the economic growth and earnings. It was a sign that gains in capital spending and inventories would likely to slow down. The results came after reports released last week showed the economy added more jobs than the estimate and unemployment rate dropped to its lowest level in four years.

Payrolls increased by 236,000 workers in February after a revised 119,000 gain in the previous month. This was according to the report released by the Labor Department last week. Unemployment rate dropped to 7.7 percent last month, which is its lowest level since December of 2008. January’s unemployment rate was 7.9 percent.

The increase in the small business index was headed by the 6 percentage point increase in businesses that are planning to increase their inventories that drove the measure to a net minus one percent. The number of businesses planning to make capital outlays in the next three to six months increased 4 percentage points, which is the largest gain since January 2007.

Employment at small businesses improved as the number of owners saying they plan to hire new workers increased 1 percentage point to 4 percent. The number of owners that said job openings is hard to fill increased 3 percentage points to 21 percent.

The number of small businesses who predicted better economic conditions in the next six months was at negative 28 percent, which is the weakest component of the index. February’s reading was up 2 points compared to the previous month.