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It’s Trump’s Economy! Small Business Optimism Shatters Reagan’s Record

It’s Trump’s Economy! Small Business Optimism Shatters Reagan’s Record

The National Federation of Independent Business’ Small Business Optimism Index set a new record high for the month of August, shattering the previous record set in 1983 and confirming what most Americans already know — the economy is firing on all cylinders under President Donald Trump.

The NFIB Research Center has been collecting small business economic trends data and publishing quarterly surveys since 1973, and monthly surveys since 1986.

The sample is drawn from NFIB members, who are sent the surveys to complete to come up with the final score. August’s score hit 108.8, topping the previous high of 108 set under Ronald Reagan’s leadership 35 years ago.

NFIB-chart

According to the report:

It’s a RECORD! Small business owners continued to deliver an “amazing” performance, taking the Index of Small Business Optimism up 0.9 points to a record-high of 108.8. Six of the 10 Index components advanced, three declined, and one was unchanged. Job creation plans and job openings both set new records, reflecting the need for workers and the tightness of the labor supply. Capital spending plans were the highest since 2007 and inventory investment plans the strongest since 2005.

The August Index has more “muscle” than any past reading. The “hard” component of the Index (job creation plans, job openings, capital spending plans, inventory plans, and earnings) soared to a historicrecord reading of 107.9. This caps a change in the complexion of the Index which was dominated by the “soft” components (inventory satisfaction, good time to expand, expected business conditions, sales expectations, and expected credit conditions) at the beginning of the record run that started in December 2016, but is now driven by the spending and hiring components, generators of GDP growth.

optimism-chart-1-7

The report goes on to note the “small business engine continues to roar with the dramatic change in economic policies since November of 2016.”

In December 2016, the Index jumped 8 points to 105.7, virtually equal to its average reading since then of 105.8. At the beginning of this historic run, the Index gains were dominated by expectations: good time to expand, expected real sales, and expected business conditions. Now the Index is dominated by stuff that makes GDP grow: job creation plans, job openings, strong capital spending plans, record inventory investment plans, and, earnings. Small business is clearly helping to drive that “4 percent growth” in the domestic economy.

Credit is not a problem, few report being unable to meet their financing needs. The Ten Year Treasury yield did hit 3 percent, a rate typically used by small business lenders as the base for loan interest rates. And, the Federal Reserve is expected to tack on another 50 basis points by year end. Mortgage rates may be
affecting the housing market, although the inability of builders to increase housing supply and the asociated rise in house prices are probably a bigger problem for our construction firms who can’t hire the workers they need.

The report concludes that “politics, rather than the strong economy and low unemployment, will continue to dominate the news. But this is not likely to have much of an impact on the level of economic activity which is on course to equal or surpass last quarter’s performance.”

Ed. note: Are you a small business owner? Let us know how your company is doing in the Trump economy in the comments below!