Small Business Confidence Back at Pre-recession Levels

Tuesday, 13 May 2014 08:03 AM

 

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U.S. small business sentiment jumped to its highest level in 6-1/2 years in April, which should bolster hopes of an acceleration in economic activity in the second quarter.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index rose 1.8 points to 95.2 last month, the highest reading since October 2007, when the economy was on the cusp of its worst recession since the 1930s.

"April's reading took the index to a post-recession high and a recovery high level," the NFIB said in a statement.

It adds to data such as employment and surveys on the manufacturing and services industries that have shown the economy regaining steam early in the second quarter after growth braked abruptly in the first three months of the year.

Seven of the index's 10 components advanced, with gains in job creation plans and the share of businesses optimistic about earnings. There also was an increase in the share of businesses raising inventories, which was one of the drags on first-quarter growth.

More owners reported they could not find qualified workers to fill open positions, which is leading to higher wages.

"Inflation will begin to pick up because reports of higher compensation are growing in frequency and these costs will be recovered in higher prices," the NFIB said.

Almost a quarter of businesses reported raising prices in April. Another 25 percent plan to increase their prices over the next few months.

"Reports of increases in average selling prices have accelerated sharply in the last few months, reaching the highest level since 2011," said the NFIB.

© 2014 Thomson/Reuters. All rights reserved.

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