U.S. small business sentiment index falls in December

The U.S. small business sentiment eases in December. The NFIB’s small business optimism index dropped 0.4 points to 104.4 in the month. The headline print came in a bit above market expectations of 103. The index has fallen in the past four months; however, it continues to be elevated compared to history. Moreover, the sentiment measure hovering around 107 throughout the year, 2018 marked the most optimistic year in the survey’s history.

Subcomponents data came in mixed, with six recorded a drop and four rebounding on the month. The share of companies expecting the economy to rebound recorded the biggest fall, dropping 6 points to 16 percent. The share of companies reporting higher earnings this quarter over last and those that believe that now is a good time to expand, marked other notable falls.

Meanwhile, the employment subcomponents came in strong. Employment rose in December, while plans to increase employment also rebounded. Concerns about the quality of labor continued to be the most pressing issue for business owners in spite of easing off slightly, whereas unfilled job openings rose to an all-time high of 39 percent.

Businesses continued to stimulate compensation to attract workers, while the share of those planning to do so in the coming months stayed elevated. The share of companies making capital expenditures in the past 6 months remained stable at 61 percent, but capital outlay plans continued to fall and are down 8 points from the August cyclical peak.

“Given concerns regarding monetary policy, trade uncertainty and the pronounced late-year selloff in equity markets, the slight decline in small business confidence in December may not be entirely unwarranted. Yet, despite the recent losses, the headline confidence measure remains elevated relative to history, suggesting that morale among American small businesses is still quite upbeat”, noted TD Economics in a research report.

While both small business sentiment and overall economic growth is expected to stay at sound levels, a confluence of factors implies that 2018 might stand as a high watermark.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bearish at -86.9468. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex