Small Business Confidence Hits 1-Year High in May

Lifestyle and BudgetReuters

Small business optimism rose to a one year-high in May, a hopeful sign for an economy that has hit a soft patch.

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The National Federation of Independent Business said on Tuesday its Small Business Optimism Index increased 2.3 points to 94.4 last month, the highest level since May last year. It was the second straight month of gains in the index.

Eight of the index's 10 components advanced, but capital spending plans were unchanged and job creation plans dipped.

The gains in the index suggest that while growth slowed early in the second quarter, the cooling in activity would probably be short-lived as the economy adjusts to higher taxes and deep government spending cuts.

"Expectations about the future course of the economy clearly improved over the past few months, but not to levels seen in a 'recovery' or even in periods of solid growth," the NFIB said.

Last month, the share of owners expecting better business conditions over the next six months increased 10 points. That accounted for about 40 percent of the rise in the index.

There were also gains in the share of owners expecting a rise in their inflation-adjusted sales, as well as those who believed this was a good time to expand operations and increase inventories.

While job creation plans slipped, the percent of small business owners reporting they could not fill job openings nudged up.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)