U.S. Small Business Optimism Remains High

The February 2005 NFIB Small Business Economic Trends Survey is out. The NFIB's Optimism Index remains at record high levels. U.S. small businesses feel good about the economy and the conditions their businesses operate under:

"Overall, 2005 is looking pretty good. Outside of the spectacular run of Index readings over the past 20 months, there are few periods in the 30 year history of the NFIB survey with Index readings this strong (103.7). Job creation plans (a net 15 percent plan to increase jobs) are stronger than any registered in the great 1980s expansion. Only the late 1990s produced higher readings.

Capital spending plans are historically very solid, over three points above the average reading for 2001 through 2004. Inventory building is still looking like a contributor to growth in 2005.

The percent of firms expecting the economy to improve over the following six months has remained stubbornly high compared to past expansions, more good news. The percent of owners viewing the current period as a good time to expand substantially has been running near record levels. Profit trends support the firms' abilities to deliver on capital spending and expansion plans.

Putting all of these pieces together produces a very positive mosaic for economic growth in the first half of 2005."

Perhaps the most interesting piece of information from this report is the listing of "Single Most Important Problem," as shown in the following chart. The higher the number, the more important the problem:

So much is written about small businesses finding money, when that is their least important problem. The most important problem for small businesses in the United States, by far, is the cost of health insurance, followed by high taxes.