The National Federation of Independent Business (NFIB) has just released the Small Business Economic Trends Report for May 2010. The report published since 1973 measures small business sentiment on numerous economic and business factors that confront small businesses.

This months report indicates that small business optimism is improving. The NFIB index rose 3.8 points in April. The rise boosted the optimism Index above the 90 level for the first time in 21 months. The NFIB Index has never registered such a protracted reading of negative sentiment in the four decade history of the index.

During April nine of the ten index components rose, an indication of improving conditions of most business factors. The single exception was employment sentiment which continued to signal small businesses remain cautious on creating new jobs. Historically, small businesses have been the major driver in job creation following recessions. The poor job creation reading by the index continues to be a contra indicator of economic recovery. Small business owners are by nature and temperament optimistic and the report indicates that small businesses are still very cautious about allocating capital for jobs to meet improving business conditions.

Highlights of the Report:

* Jobs: Average employment per firm was negative 0.18 in April. Average employment has fallen each month since July 2008. Eleven percent of survey respondents reported unfilled job openings. During the next quarter 7 percent plan layoffs and 14 percent plan to create new jobs.

* Credit: The index reports that 31 percent of regular borrowers (those seeking credit) report difficulties in arranging in getting a loan. A net 14 percent reported difficulty in getting loans. Overall, 91 percent of the owners reported all their credit needs met or they did not need to access credit. Only 4 percent of the owners reported finance as their top business problem. Pre-1983, as many as 37 percent cited financing and interest rates as their top problem.

* Profits: The index reported profits improved by 12 points in April. 14 percent of respondents reported higher profits, and 51 percent reported profits falling. Of the owners reporting higher earnings, 57 percent cited stronger sales as the primary cause and 7 percent each credited lower labor costs, material costs and higher selling prices. For those reporting lower earnings 57 percent cited weaker sales, 4 percent blamed rising labor costs, 6 percent higher materials costs, 2 percent higher insurance costs, and 6 percent blamed lower selling prices.

* Prices: Fifteen percent of respondents reported raising average selling prices, but 24 percent reported average price reductions. April is the 17th consecutive month in which more owners reported cutting average selling prices that raising them.

Components of the Optimism Index include: Labor Markets, Capital Spending, Inventory and Sales, Inflation, Profits and Wages, Credit Markets

The NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since1986. The sample is drawn from the membership files of the NFIB.

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