The NFIB Small Business Optimism Index saw a notable increase of 9% in November, driven by the positive perceptions of small business owners regarding the election results. However, this optimism has somewhat waned in January as some more uncertainty about the future has crept in.
According to the latest survey conducted at the end of January, the optimism index decreased by 2%. Despite this decline, optimism remains above the 51-year average, which has been the case since the November election. The more notable change in the recent survey data was the 16% increase in the uncertainty index. Small businesses continue to show optimism; however, they perceive a more uncertain future and have consequently reduced their hiring and capital expenditure intentions. Although small businesses remain positive about the future, recent economic uncertainties have led them to refrain from committing to increased spending.
There is expected to be more volatility in the market due to recent policy changes. Even if investors are optimistic about the long-term outlook, the short-term disruptions caused by rapid changes may lead to increased market volatility and potential downturns. If higher levels of uncertainty persist, medium-term growth may be affected as companies are unwilling to commit to investments that fuel growth. However, as companies remain optimistic about their outlooks, investors should continue to stay in risk assets.
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The National Federation of Independent Business (NFIB) Small Business Optimism Index is a composite of ten seasonally adjusted components. It provides an indication of the health of small businesses in the U.S., which account of roughly 50% of the nation’s private workforce.
The World Uncertainty Index is a measure that tracks uncertainty across the globe by text mining the country reports of the Economist Intelligence Unit. The index is available for 143 countries.
