In November, confidence among the small businesses rose to their highest level since recession. More companies predicted that economy and sales would rise according to a recent survey. The optimism index of the National Federation of Independent Business rose to 93.2, the highest since December 2007. Out of the 10 components of the index, seven rose and three fell. The measure averaged 100.7.
This brighter outlook would mean that small-business owners will start hiring after the jobless rate hit seven month high. The survey too hints on higher sales and an increase of consumer spending that covers 70 percent of the economy.
Substantial improvement in expectations in terms of economic performance is seen. This is critical for spending and hiring to exceed beyond survival and replacement levels. The gauge that determines better business conditions rose to the highest since June 2005. It jumped 8 points to rise 16 percent in November.
Russell 2000 Index gauging small U.S. companies rose 28 percent since Aug 31 in comparison to its 18 percent gain in Standard & Poor’s 500 Index.
Bankers Interest in Small Businesses Rise
Investors’ confidence has definitely increased with this out performance. Bank of America Corp, the largest U.S bank in terms of assets disclosed its intention to hire 1,000 employees by next year in order to focus on companies having $3 million or fewer sales.
Citigroup Inc., is targeting U.S. companies having less than $20 million of annual sales. The bank plans to hire 200 employees by end of 2011. This would bring small business bankers to 500. According to reports released by NFIB, hiring plans over next three months has risen 3 points to result in a net 4 percent. The report also indicates nine percent of businesses to increase staff, 12 percent anticipated workforce reductions and fewer planed payroll cuts.
Gains in Payroll
Since March, small companies have successfully added jobs that meant a 54,000 gain in November. The gauge about businesses willingness to expand also increased two points that reached 9 percent. Capital Investment plans too rose two points to reach 20 percent. The share of owners projecting higher sales increased five to six percent.
Trends Not ‘Supportive’ for widespread recovery
The sale trends do not really support a widespread recovery. Businesses problem persists due to weak sales. It continues to be the main concern of 30 percent of respondents. There has been a historic rise in the percentage of owners. For many owners, there is very feeble possibility that investment in equipment or new workers would pay back. This is the cause of fall in credit demand in financial markets. It remained that 90 percent of respondents reported that their credit needs were met. This also meant that they were not interested in borrowing. Banks have made their standards and terms flexible for some business and household loans.
Inflation has been low due to limited demand. October remained the 24th straight month when small business owners cut average selling prices. Payrolls jumped lesser than forecast though 50,000 workers have been inducted. The jobless rate too increased to 9.8 percent. NFIB report has been tabled after surveying 807 small-business owners on November. The small businesses comprise of 99 percent of all U.S. employers and they have created 65 percent of new jobs in past 17 years, according to the findings of U.S. Small Business Administration.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to