Recession Fears Evaporate: Small Business Optimism Rises in October

Optimism among U.S. small-business owners moved higher than expected as concerns over a possible recession faded.

The National Federation of Independent Business’s Small Business Optimism Index climbed 0.6 points to 102.4. That exceeded the consensus forecast and brought the measure close to its six-month average.

“A continued focus on a recession by policymakers, talking heads, and the media clearly caused some consternation among small businesses in previous months, but after shifting their focus to other topics, it’s become clear that owners are not experiencing the predicted turmoil,” said NFIB President and CEO Juanita D. Duggan.

Eight of the ten components that make up the index rose in October. The rise was led by GDP-producing plans for job creation, inventory investment, and capital spending, according to the NFIB.

In a hopeful sign for business investment, lately one of the weakest parts of the economy, reports of actual capital spending increased and inventory investment improved from a modest negative level in September. The measure of planned capital expenditures climbed 2 percentage points to a five-month high of 29 percent.

Reports of rising labor compensation, a key to sustained consumer spending, also increased.

“Small business owners are continuing to create jobs, raise wages, and grow their businesses, thanks to tax cuts and deregulation, and nothing is stopping them except for finding qualified workers,” Duggan said.

Economists watch the small business survey for indications of the health of the labor market, business investment, and domestic demand.

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