US: Small business optimism declines modestly in September - Wells Fargo

The Small Business Optimism dropped  2.3 points to 103.0 in September. According to analysts from Wells Fargo, damages and interruptions to business from the late summer hurricanes were likely behind most of the drop.

Key Quotes: 

“The National Federation of Independent Business (NFIB) Index of Small Business Optimism fell 2.3 points in September to 103.0. The drop was not totally unexpected, as the data were at least partially impacted by hurricanes Harvey and Irma, which affected large parts of Texas and Florida. The largest drop came in the expected sales component, which plunged 12 points to 15 percent. The proportion of business owners stating that now is a good time to expand their business also tumbled 10 points during September and the proportion of firms planning to make capital outlays dropped by 5 points.”

“Even after the declines, Small Business Optimism remains relatively strong and is consistent with solid economic gains. Hurricane related influences are clearly significant. Texas and Florida are the nation’s second and third largest states and both have been growing rapidly. The two states directly account for 14.2 percent of the nation’s GDP and have accounted for 22.7 percent of the nation’s real GDP growth since 2010. Small businesses play a huge role in both states as small businesses from all over the country sell into these rapidly growing states. Harvey and Irma were unique in that the massive size of the storms impacted a wide geographic area and triggered an unusually large evacuation, which resulted in more losses from business interruption than in prior storms.”

“Data on hiring held up reasonably well considering the sharp pullback in nonfarm employment reported for September. Job creation clearly faded during the month, with the proportion of firms adding workers falling 2 points to 12 percent and the proportion of firms reducing employment rising 1 point to 13 percent. The proportion of firms attempting to hire workers also fell 2 percentage points but remained at an exceptionally strong 57 percent. Moreover, a whopping 86 percent of the firms attempting to hire workers reported few or no qualified applicants for the positions they were trying to fill. The problem is most acute for construction firms and manufacturers, which both cite the inability to find qualified workers as their single most important problem.”