Small businesses plan to make capital outlays at highest level since 2006

The National Federation of Independent Business Index of Small Business Optimism rose 0.1 points to 105.3 in August. Five of the components increased and five declined.

The most significant increase was among business owners planning to make capital outlays in the next three to six months, which is now at its highest level since 2006. According to NFIB Chief Economist Bill Dunkelberg, the August figures for capital outlays are typical of a growing economy.

“Small firms are now making long-term investments in new machines, equipment, facilities, and technology,” he said. “That’s a real sign of strength, and it will be interesting to see if the August result becomes a trend.”

Plans to make capital outlays were most common among professional services firms (46 percent), followed by manufacturing (38 percent), wholesale trades (36 percent), agriculture (33 percent) and construction (33 percent).

A net 27 percent of small business owners expected better sales in August, a five-point gain over the previous month. That matches the number of owners who said it’s a good time to expand, a four-point jump from July.

Small business owners reported a seasonally adjusted average employment change per firm of 0.18 workers per firm over the past three months, virtually unchanged from July. Fourteen percent (up 1 point) reported increasing employment an average of 4.4 workers per firm and 12 percent (up 1 point) reported reducing employment an average of 2.4 workers per firm (seasonally adjusted). Fifty-nine percent reported hiring or trying to hire (down 1 point), but 52 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill.

Nineteen percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (unchanged), second only to taxes. Labor quality is the top ranked problem in construction (33 percent) and manufacturing (25 percent), receiving more votes than taxes and regulatory costs. Thirty-one percent of all owners reported at least one job opening they could not fill in the current period, down 4 points but a very high reading. A seasonally adjusted net 18 percent of owners plan to create new jobs, off 1 point from July but historically very strong.

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