Confidence at U.S. small companies increases for third month

Posted 12/13/11

WASHINGTON - Confidence among U.S. small companies rose in November for a third month as hiring intentions climbed and companies projected sales will improve, a survey found.

The National Federation of Independent Business’s index climbed to 92, the highest level since February, from October’s 90.2, the Washington-based group said Tuesday in a statement. The gauge averaged 88.2 in the recession that ended in June 2009.

“The numbers have been depressing for so long, any little progress looks good,” William Dunkelberg, the group’s chief economist, said in a statement. “More firms are now creating jobs than cutting them and plans to do so rose nicely, even if they are still at weak levels.”

Hiring plans increased to the highest level in more than three years, and expansion and capital investment gauges picked up. The Federal Reserve, in its latest survey of U.S. regions, said the economy expanded from mid October through November at a “moderate” pace in 11 of 12 districts, led by gains in consumer spending and manufacturing.

The net share of small-business owners planning to hire over the next three months rose four points to a 7 percent, the highest reading since September 2008, the report showed. Employment increased for the first time in six months.

The share of owners projecting higher sales, adjusted for inflation, rose eight points to 4 percent, the highest since April. A gauge of expectations for better business conditions six months from now climbed four points to a net minus 12, marking a third monthly gain from a record-low of minus 26 in August.

Europe, Budget

Small business owners are sensitive to developments in the European default crisis and the U.S. political debate on deficit cutting and tax policy, NFIB said in the statement.

“Political developments will continue to dominate the news, good or bad, and have a significant impact on owner optimism,” Dunkelberg said.

The survey’s net figures are calculated by subtracting the percent of business owners giving a negative answer from those with a positive response, and adjusting the results for seasonal variations.

A measure of earnings trends decreased by two points to a net minus 28 percent, the report showed. At the same time, a net minus 10 percent of small businesses said they expect easier credit conditions, a one-point improvement from the prior month.

The NFIB report was based on responses from 781 small- business owners through Nov. 30. Small companies represent more than 99 percent of all U.S. employers, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise employing as many as 500 people.

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