U.S. Small-Business Sentiment Climbs Most in More Than a Year

(Bloomberg) -- Sentiment among small U.S. businesses climbed by the most in more than a year as more owners said profit trends are looking up and that it’s a favorable time for expansion, adding to signs that a key part of the economy is holding up in the fourth quarter.

The National Federation of Independent Business optimism index rose 2.3 points in November to a four-month high of 104.7, topping all estimates in a Bloomberg survey of economists that had called for 103. The composition of the report released Tuesday showed that earnings trends were the biggest driver of the gain, posting the biggest increase in almost two years, though the overall rise was broad-based as seven of 10 components advanced.

Key Insights

• The second straight gain follows Friday’s unexpectedly strong November jobs report and is the latest sign the world’s largest economy will avoid a major stumble in the final three months of this year.
• Views on whether it’s a good time for expansion were a big driver of the gain, with that measure rising to the second-highest reading of this year. Hiring plans also gave a boost as 61% of respondents reported hiring or trying to hire, an increase of 1 percentage point, though 53% reported few or no qualified applicants for the positions they were trying to fill.
• “Overall, the Main Street economic machine continued to push the economy forward,” NFIB Chief Economist William Dunkelberg and Director of Research and Policy Analysis Holly Wade wrote in the report.

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• Plans to increase inventories and sales expectations were the only two categories to post weaker readings. Expected credit conditions were unchanged.
• The improvement lifts NFIB’s measure further above its two-year low of 101.2 in January, and closer to the record 108.8 it reached last year.

--With assistance from Chris Middleton.

To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net

To contact the editor responsible for this story: Scott Lanman at slanman@bloomberg.net

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