Small Business Optimism Increases

The small business optimism index rose 1 point in April to 93.6, ending a string of declines and bouncing back from the 2-year lows set in March. But small business owners are still quite pessimistic, citing the poor economy and the political climate as the two main reasons for not expanding. Five of the 10 components showed gains in April, four were unchanged and one declined. Both of the report's employment components improved, with job openings hard to fill posting the largest gain of the index by rising 4 point to to 29, while plans to increase employment rose by 2 points to 11. Although still the weakest of the components, earnings trends also improved, rising 3 points to a minus 19. In the one sour note of an otherwise generally upbeat report, business owners were even less expectant of future improvement in the economy, with that component dropping 1 point to minus 18.

Recent History Of This Indicator:
The small business optimism index has been on the decline, hitting a two-year low of 92.6 in the March report. Employment readings have held up though have been inching lower. But earnings trends are very weak and, in perhaps a positive indication for future inflation, have been getting hit by higher labor costs that have yet to be passed through to selling prices. Forecasters see a moderate bounce for the index in April to 93.1.