In March, US NFIB small business optimism weakened for the first time in seven
months. NFIB small business optimism dropped from 94.3 to 92.5, while the
consensus was looking for a further improvement to 95.0. The deterioration in
sentiment is confirmed by the details as the percent of firms reporting: plan to
hire (0% from 4%), plan to increase inventory (0% from 2%), increased capital
spending (22% from 23%), expect better economy (-8% from -6%), expect higher
sales (8% from 12%), positions not able to fill (15% from 17%), easing of credit
conditions (-11% from -10%), good time to expand (7% from 8%) and positive
earnings trends (-23% from -19%) all weakened. Only the percent of firms
reporting inventory satisfaction (3% from 2%) and higher selling prices (6% from
1%) rose in March. Over the previous six months, the NFIB small business
indicator showed an encouraging rebound and was nearing last year’s highs.
This, quite significant and broad-based weakening in sentiment, is a
disappointment as it suggests that the climate remains challenging for small
firms. Nevertheless, next month’s reading should indicate whether this is only
a temporary dip or a more sustained weakening in confidence.