Small businesses turn more optimistic

PPP appears successful at propping up small businesses through the rough times

Small-business owners turned more optimistic about an economic rebound in May and shifted to the view that a coronavirus-induced recession will be “short-lived,” a closely followed survey shows.

The optimism of small companies in the U.S. economy rose 3.5 points last month to 94.4, the National Federation of Independent Business said Tuesday. The increase was twice as large as Wall Street had forecast.

The small-business survey had tumbled in March by the most ever as the pandemic slammed the economy. It fell again in April, but not by as much as expected.

“As states begin to reopen, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies,” said NFIB’s chief economist Bill Dunkelberg. “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.”

What happened: Sales expectations for the next six months rebounded from the lowest level in the NFIB survey’s 46-year history. More companies also said they planned to invest and hire, though they were still small in number.

Business owners who plan to rehire workers said they were encouraged to do so by the federal government’s Paycheck Protection Program, a huge rescue plan designed to save small businesses and their employees. Washington is offering forgivable loans to firms that keep employees on payrolls regardless of whether they are working.

Yet businesses also complained that “generous unemployment benefits are making it harder for some firms to recall workers and fill open positions.” The federal government also enhanced and extended unemployment benefits to help out-of-work Americans during the crisis.

The NFIB index has a solid record historically in signaling peaks and valleys in the economy. The survey sank to as low as 90.9 in April, but it is still well off a 104.5 reading right before the pandemic started.