It Looks Like The Economy Is About To Roar...

The NFIB’s Index of Small Business Optimism jumped to 95.2 in April from 93.4 in March.

“This is the first time the Index has reached 95 since October 2007,” noted the NFIB. “The gain is modest but it is still the best reading post-recession. The main contributor to the improved Index came from expected business conditions. Small business owners are a bit more optimistic in this area but still 9 per cent more owners expect business conditions to deteriorate than improve.”

All of this is great news for those who had doubts the economy might struggle to accelerate again after the unusually cold winter.

The report included some good insight into the state of the labour market and the availability of credit, which is a leading indicator of business spending.

“Twenty-four (24) per cent of all owners reported job openings they could not fill in the current period (up 2 points),” reported the NFIB. This is a sign of labour market tightness, which also means that the risk of wage inflation is increasing.

Like the NFIB’s headline index, loan availability is at its highest level since the financial crisis. Easy lending standards are generally considered leading indicators of business investment and hiring and economic growth in general.

Meanwhile, the optimism expressed by small businesses is mirrored by large public companies as well.

Dan Greenhaus of BTIG notes that on earnings conference calls this quarter, there was a lot of talk about how the economy really picked up after the winter ended.

He writes:

  • In past earnings seasons, varying degrees of optimism and pessimism have found their way into upper management’s tone, reflecting the start/stop nature of this recovery. In recent quarters though, management has tended towards the more optimistic take on things.
  • This optimistic view has taken a turn upwards during the first quarter. Weather is blamed for everything from everyone. However, companies from across the spectrum talked about how March and April looked much better than January and February.
  • Cards noted strong trends in April, ETN noted “clearly strengthening trends,” EMR saw “pretty good orders” in April,” SBUX talked about “very strong” orders in April and HSY noted that in April, “consumer shopping behaviour was returning to normal.”

So small business optimism is up. Job openings are rising. Credit is more available. And lare companies saw a nice comeback in April.

Maybe it’s real this time?

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