Small Business Optimism Rises

The small business optimism index rose 0.7 points in June to 94.5, the third monthly increase since falling to a 2-year low in March. The improvement in small business optimism slightly exceeded expectations, though the index remains in the downtrend in place since the 100.4 recovery peak set in December 2013 and below the 42-year average of 98. Four of the 10 components of the index posted gains, three fell and three remained unchanged. Expectations that the economy will improve rose 4 points, posting the largest gain just as it did in May, but with the index still negative at minus 9 the majority of business owners continue to expect a worsening of business conditions. The two strongest components of the index recovered from their May declines, with plans to increase capital outlays rising 3 points to an even more solid 26, while job openings were even harder to fill, rising 2 points to 29. Expectations of an improvement in real sales rose 1 point to 2, but plans to increase inventories fell 2 points to a minus 3 and plans to increase employment dropped 1 point to 11. Business owners were slightly less optimistic than in May about now being a good time to expand, with the component falling 1 point to 8, and most continue to be negative about earnings trends, with the component remaining unchanged at minus 20 as the most pessimistic part of the index.

Recent History Of This Indicator:
The small business optimism index has been moving up from two-year lows, to 93.8 in May. Employment readings were positive in May and economic expectations, though still weak, did improve. This report for June could include an early Brexit effect but the consensus is positive, calling for a 2 tenths rise to 94.0.