U.S. NFIB small business optimism index remains flat in May

The U.S. NFIB’s small business optimism index continued to remain at its post-election gains. The index stayed at 104.5 in May. The flat print was consistent with market projections, with small business greatly holding on to the gains seen since last year’s election.

Five sub-components recorded a gain, while four dropped and one stayed the same. Capital investment plans was up one point to 28 percent, while plans to increase employment was up 2 points to 18 percent.

Other market indicators stayed positive with unfilled job openings rising one point to 34 percent and marking its best level since 2000. The share of companies increasing worker compensation was up 2 points to 28 percent while the share of companies ‘planning’ to increase compensation stayed the same for the third straight month at 18 percent. In the meantime, worries regarding the quality of labor rose to the highest point since 2001 at 19 percent, noted TD Economics in a research report.

Meanwhile, expectations that now is a good time to expand and earnings trends alleviated off one point apiece to 23 and 10 percent respectively, while current inventory levels and indications to raise inventories also pulled back slightly.

The sub-index measuring the level of uncertainty dropped one point to 82. Even if this measure has dropped in the past few months, it continues to be high as compared to its historical median of 66. Small business sentiment has managed to greatly hold on to the gains seen since the election with improvements seen in capital investment and employment plans.

The survey’s labor market indications show a tightening labor market and rising inflationary pressures. Especially, rising job openings and increased concerns regarding the quality of labor should carry on underpinning stronger earnings, stated TD Economics.