NFIB Index of Optimism for Small Business, Trump, Tax Credit Reduced

US small businesses have never felt so good, at least according to the small business optimism index of the National Federation of Independent Business.

The monthly index of the lobbying group reached 108.8 in August, the highest level in its history in 45 years. The reading eclipsed the previous record of 108 in July 1983. According to NFIB, many of the subcategories listed in the index also reached historical levels.

"Job creation plans and job opportunities have both set new records, reflecting the need for workers and lack of manpower," NFIB said in a statement. "Capital expenditure plans have been the highest since 2007 and stock investment plans are the strongest since 2005."

Juanita Duggan, President and CEO of NFIB, also pointed out that the strength of the index comes from actual business intentions rather than general expectations regarding future economic growth.

"Often, the index of optimism based on this type of registration, it is based on expectations as if it were a good time for expansion, sales expected, et cetera", said Duggan to Business Insider. "In this case, the index is dominated by the activity that actually generates GDP: job creation plans, employment opportunities, capital expenditure plans and benefits".

Although the index remains an index of expectations rather than measuring actual activity, recent data on capital expenditures and hires reflect the high level of the index.

According to Bill Dunkelberg, an economist at NFIB, heightened optimism should start helping workers.

"We have a record percentage of companies planning to increase their compensation," said Dunkelberg. "Some Wall Street researchers have shown that three-quarters, once the percentage of our homeowners seeking to increase compensation increases, real compensation also increases, so we continue to see an increase in compensation."

According to Duggan and Dunkelberg, politics is also a major factor in the rise of optimism. The NFIB index jumped directly after the election of President Donald Trump, with many business leaders predicting tax cuts and deregulation.

"There is no doubt that the policy change in Washington has everything to do with the increase in the index of optimism," Mr Duggan said. "For years, our members have told us that regulations, taxes and the cost of health care are their biggest problems and that you do not see a significant tax reduction, significant deregulation, This is what motivates this optimism. "

The NFIB has long advocated a reduction of taxes and supported the GOP tax law in the run-up to its adoption in late 2017.

Many economists have argued that the boost to tax cuts is temporary, fueling a near-term revival of US GDP that will eventually fade. But Dunkelberg argued that, given the certainty of medium-term tax cuts, the recovery should continue.

Duggan also suggested that the positive outlook will not change anytime soon.

"This index shows the strongest small business economy in 50 years and shows no signs of slowing down," she said.