NFIB's small business optimism index unexpectedly declined in March, falling by 2.8 points to 95.2. The reading came in well below the median consensus forecast, which called for the index to remain unchanged on the month.
No matter which way you slice it, this was a disappointing report. All 10 of the major sub-components recorded declines on the month, with the largest deterioration coming from the percent of firms expecting the economy to improve (falling to -7% from -1%) and current job openings (falling to 24% from 29%).
The pullback in the percent of firms planning to hire is particularly discouraging, especially coming on the heels of last month's weak payrolls report. Given the forward looking nature of this sub-component, the decline in March suggests that there may be more than lagged weather effects weighing on last month's slowdown in employment.
According to TD Economics - "Looking past the first quarter of 2015, the overall economic backdrop should remain favorable for small and medium sized businesses. Accessibility to credit remains favorable for business owners, which taken alongside the low interest rate environment should be supportive of future capital expenditures. Moreover, lower commodity prices should not only help to keep input costs down, but also provide a boost to overall household income, which should, in turn, support future sales growth."
