U.S. small business optimism improves slightly in August

The NFIB's small business optimism index edged up by 0.5 points in August to 95.9, coming in nearly in line with market expectations which called for a 96.0 print.  The details of the report were somewhat mixed, five of the index's ten components moved higher on the month, three declined, and two remained unchanged.

The biggest gains were seen in the quarterly earnings expectations and in the share of firms with unfilled position, which rose by 4 points apiece. Plans to increase employment (+1 point) and inventories (+1 points) also ticked higher, and slightly more businesses expected to see higher real sales in six months (+1 point).On the other hand, relative to a month earlier, fewer businesses cited that it was a good time to expand right now (-2 points). Expectations about the economy and credit conditions also deteriorated slightly in August, falling by 2 points each.

This was a not a particularly exciting report, but it was a decent one nonetheless. The index's August reading was nearly on par with its six-month average print of 96.0. Moreover, many of the key subcomponents, such as those tied to business profitability, sales and hiring showed improvement relative to a month earlier.

The survey's labor market gauges, such as hiring intentions and the share of firms with unfilled positions moved higher in August, which is re-assuring given to the modest employment gain in the August payroll report. This suggests that small and medium businesses are not yet tapering their pace of hiring, and increases the likelihood that we will see significant positive revisions to August payrolls. 

"Small business confidence remained relatively unperturbed by concerns about global growth and the resulting bout of volatility in financial markets in August. One reason for this is the fact that small businesses are mostly domestically-oriented, making the health of the U.S. economy far more important. On that front, domestic economic performance remained robust over the summer months and outlook is similarly upbeat, with gains in real incomes and employment expected to support consumer spending over the remainder of the year", says TD Economics.