NFIB small business optimism index remained unchanged in October
According to the National Federation of Independent Business, or NFIB, the small business optimism index remained unchanged at 96.1 in October. The reading was below the consensus estimate of 96.4. With no improvement in business optimism, the iShares Russell 2000 ETF (IWM) and the Direxion Daily Small Cap Bull 3X ETF (TNA) fell 0.55% and 1.6%, respectively, on November 10. IWM and TNA have fallen 2.1% and 11.2%, respectively, YTD (year-to-date) as of November 10.
Bill Dunkelberg, NFIB chief economist, stated the following in a press release: “The October NFIB survey gave no indication of a resurgence in growth in the small business sector with the Index remaining below the 42 year average of 98. The labor market components might have held at historically strong levels but this time owners reported no net growth in employment, which is a significant drop from reports in the previous four months.”
Small businesses face difficulty in finding qualified workforce
Although 11% of businesses plan to create new job opportunities, finding a qualified workforce remained one of the top problems faced by small businesses in October. Also, with business returns remaining low, only 26% of owners planned to undertake capital expenditures in October. Moreover, only 13% felt it was a good time to plan expansion. Negative earnings trends lost another 3 points as owners reported raising worker compensation in October. Credit conditions remained negative at 5%, however it has improved 1 point from past month.
Small-cap companies such as Tyler Technologies (TYL), Steris (STE), Manhattan Associates (MANH), and CubeSmart (CUBE) rose 0.91%, 1.0%, 1.1%, and 1.7%, respectively, on November 10. Small businesses tend to be adversely affected by a poor business climate, and expectations about the economy have remained moderate among small business owners.
The overall business climate has remained subdued with global volatility, the slowdown in emerging economies, and a strong dollar. However, further improvement in conditions may call for a rate hike by the Federal Reserve in the December FOMC (Federal Open Market Committee) meeting.
We’ll see how price pressure may influence the Fed’s decision and explore details about import and export prices in the next article in this series.