U.S. small business optimism index drops in September

Small business optimism in the U.S. eased in the month of September. The NFIB’s index dropped 1.3 points to 101.8, slightly below market expectations of a reading of 102. Looking beneath the headline, seven of the ten components dropped on the month and three stayed the same. No index component rose. Responses in the expectations categories led the way in terms of declines, extending falls recorded last month.

Companies expecting the economy to rebound dropped three points to 9 percent, whereas those expecting higher real sales dropped by one point to 16 percent. In spite of looser monetary policy, companies expecting easing credit conditions also dropped by two points. Current inventory and plans to increase inventories stayed the same relative to the prior month.

The number of companies reporting that now was a good time to grow also dropped by four points to 22 percent and plans for further capital outlays reversed the one point gain it made in August. Labor market indicators also dropped. Companies planning to increase employment declined as well as those planning to raise worker compensation. The share of businesses seeing ‘few or no qualified workers’ for their open positions also dropped.

“Continued trade battles and tariffs are complicating the investment landscape as owners are increasingly reluctant to make major spending commitments. Notwithstanding, the optimism index remains above its historical average. As China and Washington attempt to push negations forward and deescalate the trade battle, business confidence could get a boost”, said TD Economics.