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First Cut: NFIB Small Business Optimism Index continued at solid level in October

The NFIB Small Business Optimism Index for October rose modestly to 102.4 from 101.8 in September while reading below the 103.1 of August. The index level has lost the shine of 2018 but hasn’t tipped into areas that might suggest confidence is anything except solidly positive. If small businesses are facing greater uncertainty about conditions these haven’t prevented them from enjoying the ongoing expansion and planning accordingly.


Almost all the index components showed no more than normal month-to-month variation of a point or two. Eight of 10 components were higher and two were lower.

The largest gain in October was a 3 point rise to 5% for plans to increase inventories. Compare this to a 2 point increase in current inventories to -4% and it suggests that businesses are carefully  monitoring their immediate needs. Businesses may be anticipating a slight need to restock at the moment but this could change quickly.

The largest decline was 5 points off the earnings trend to -8%. This was the lowest since -8% in March and -9% in February when earnings were diminished during the federal government shutdown and in its immediate aftermath. This probably is related to the lack of pricing power that surveys of the service sector have noted in recent months.

In any case, the components related to the job market were stable and healthy in October. Plans to increase employment were up a tick to 18% in September after 17% in September and in line with most of 2019 so far, if on the lower side of the readings range. Current job openings were down 1 point to 34% and the lowest for 2019 to-date. This represents plentiful job openings, but not as many as there were. Employers continue to have difficulty in finding qualified applicants. While the level of actual compensation has fallen off from the subindexes record highs in 2018, a reading of 30% in October after 29% in September and August suggested that modest-to-moderate upward pressure on wages and benefits remained present.

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