Small business optimism gains the most since 1980
By Patrick Gillespie
NEW YORK (CNNMoney) — Small business owners haven’t felt this good about their future for a long time.
The small business optimism index hit a 12-year high in December, according to the National Federation of Independent Businesses. It rose to 105.8 from 98.4 the previous month, the biggest one month gain since July 1980.
Expectations for better sales and more favorable business conditions in the next six months under President-elect Donald Trump and the Republican-led Congress accounted for the lion’s share of the increase. The December results confirmed the “euphoria” seen in its November survey, NFIB said in its statement
“Trump has small business owners very excited,” says Michael Block, chief strategist at Rhino Trading Partners, a firm in New York.
The sharp rise in small business optimism comes on the heels of consumer confidence hitting a 15-year high in late December. That increase was also attributed to high hopes for Trump’s economic agenda.
Mom and pop business owners are very hopeful for the future. The percent of businesses expecting better business conditions in the next six months skyrocketed to 50% in December from 12% in November. Business owners also said they see higher wages, more expansion and more capital spending in the months ahead.
Trump is aiming to cut taxes, spend big on infrastructure projects, increase manufacturing jobs and repeal the Affordable Care Act, better known as Obamacare. Small business owners have complained for years that the costs associated with Obamacare hit them harder than big corporations.
Some experts caution that the small business index is a bit slanted. The respondents to NFIB’s survey tend to be disproportionately Republican, says Jim O’Sullivan, chief U.S. economist at High Frequency Economics, a research firm.
The NFIB did endorse Trump’s pick for labor secretary, Andrew Puzder, who liberals have derided for what they describe as a poor record of protecting workers’ rights.
Business owners may be more optimistic than what reality could turn out to be. The high level of optimism reflects hopes of 5% economic growth, O’Sullivan says. The U.S. economy is projected to grow about 2% this year, according to the Federal Reserve. Even Trump is only pledging 4% growth.
“I do think that hopes have been probably raised too much here and there will probably be a little bit of disappointment,” O’Sullivan noted.