In May, US NFIB small business confidence held up surprisingly well. The index dropped marginally, from 94.5 to 94.4, while a more significant weakening was expected (to 94.0). The break-down shows a mixed picture as the percentage of firms reporting: plans to hire (6% from 5%), plans to increase inventory (2% from 0%), expect better economy (-2% from -5%) and positions not able to fill (20% from 17%) increased compared with the previous month. There was however a decline in the percentage of firms reporting: higher selling prices (3% from 8%), increased capital spending (24% from 25%), expect higher sales (2% from 6%), easing of credit conditions (-10% from -8%) and positive earnings trend (-15% from -12%). The same percentage of firms reported inventory satisfaction (0%)
and good time to expand (7%).
Despite the mixed details, the balance is broadly unchanged from the previous month. We are surprised to see that small business confidence is holding up so well. The indicator is still hovering around the 2011 highs, while other US business confidence indicators dropped somewhat lower over the previous months. If small business confidence remains strong in the coming months, it is an indication that the larger firms are suffering more from the slowdown in growth in Asia and the crisis in the euro zone, while domestic demand remains robust.