Small Business Optimism Shows Improvement In April

The Small Business Optimism Index rose 5.8 points to 86.8, led higher by eight of 10 components, reported the National Federation of Independent Business.

The sub-index covering expected business conditions jumped 24 percentage points, to 2 percent, in April. Sales expectations increased 20 points to -11 percent. Capital spending plans rose 3 points to 19 percent.

Reports of better earnings rose 3 points, but the readings of -43 percent remained extremely low by historical comparisons.

The NFIB said that the three "hard" components of the index—job creation plans, inventory investment plans and capital spending plans—rose last month, although they remain at anemic levels. The gains are "good news for GDP growth and a rescue of the job market," the report said.

Employment remained weak, however. Seasonally adjusted, the average employment per firm declined by 1.02 workers. But because fewer businesses plan layoffs and more hope to hire over the next three months, the April jobs sub-index improved to -5 percent in April, from -10 percent in March. Business owners also are reducing their labor costs: A record-high 11 percent cut worker compensation vs. 12 percent that increased compensation.

"It appears that owners are not through with their labor-based cost-cutting but it is slowing," the report said.

The credit conditions sub-index rose in April, by two points to -12 percent. But " owners do not see credit conditions easing in spite of the Fed's hugely expansionary policies," the report said. A net 14 percent reported loans were harder to get, the highest level since the 1980-82 recession period. The overall outlook for easing credit conditions in coming months was poor.

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