Small business optimism sees modest increase; now at three-year high

The National Federation of Independent Business (NFIB) Index of Small Business Optimism rose 1.5 points in January, a modest increase, opening the new year with a reading of 94.1, the highest level since December 2007 when the recession started.

According to the NFIB, the slight overall uptick in optimism might have been higher, but was blunted by small business owners' skepticism about the future and continued hesitancy to spend and hire. Weak sales is still the most frequently cited top business problem. However, price-cutting is fading, and inventory-adjustments to match lower consumer spending appear to be reaching a conclusion.

"Manufacturing and exporting are leading the recovery—industries and activities that are not labor intensive—while construction, an industry historically dominated by small firms, remains depressed," said NFIB chief economist Bill Dunkelberg. "While recent political rhetoric favors small business, it is belied by the actions of policy makers whose new policies and activities almost exclusively support big businesses. While the economy is moving forward, albeit at a snail's pace, it is not nearly fast enough to dramatically improve the unemployment situation, which continues to languish."

The full report, which includes findings about employment; capital spending and outlook; sales and inventories; inflation; earnings; and credit, can be found here.