U.S. small business sentiment rises sharply in November

Small business confidence in the U.S. rose sharply in the month of November. The NFIB small business optimism index rose 3.7 points to 107.5 in the month, exceeding expectations of a modest 0.2 point improvement.

The gains were widespread with eight of the index subcomponents rising sequentially, while two dropped. Most of the gains were seen amongst the forward-looking components, with expectations about a rebound in the economy and higher real sales rising 16 and 13 points to 48 percent and 34 percent, respectively. The belief that now is a good time to expand also rose a robust 4 points to 27 percent.

Job openings dropped to 30 percent, reversing last month’s 5-point gain. In the meantime, plans to raise employment rose sharply by 6 points to 24 percent. The share of businesses stimulating employer compensation continued to be the same at 27 percent, while the share of companies ‘planning’ to stimulate compensation dropped 4 points to 17 percent. Capital outlay play plans retreated one point to 26 percent, after remaining stable last month.

Today’s report is slight a mixed bag for the Federal Reserve as the Committee starts its two days of deliberations. Positive optimism amongst small businesses and the employment metrics in particular, continue to indicate towards a tightening labor market; however, the pull-back in compensation sub-indices adds a note of caution for the Fed trying to stimulate inflation back to its 2 percent target, noted TD Economics in a research report.

“While combined House-Senate tax reform bill may pass as early as this month, this is still not a done deal, with the confidence measure likely to follow the reverberations of any delays in the political process”, added TD Economics.

At 17:00 GMT the the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 59.1486. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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