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In the wake of one of the most surprising elections in history, small business optimism surged in November, posting its largest month-over-month gain in more than three years.  As shown in the chart below, the overall index of small business optimism from the NFIB rose from 94.9 up to 98.4, which was the highest monthly reading since December 2014 and well ahead of consensus expectations for a level of 96.7.  Even after this month’s increase in optimism, sentiment among small businesses is still below its cycle peak of 100.3, but it has made up a lot of the ground it lost during 2015 and early 2016.

nfib121316-chart

Given its tendency for partisanship favoring the right, many won’t be surprised to see this index surge immediately after a Republican was elected to the White House.  The closing paragraph (see below) from the commentary section of this month’s report pretty much illustrates which way the NFIB leans.  Even with that caveat, however, it is hard to argue that sentiment hasn’t improved since early November.

Owners clearly expect a different, and better from their perspective, set of economic policies to help the economy shed the growing number of obstacles of the last eight years in tax and regulatory policies that have depressed growth. This economy has grown in spite of, not because of, Obama’s economic policies.  Population growth explains most, if not all, of our progress.  The prospective impact of expected policy changes was translated into very positive views of economic activity which will translate into more spending and hiring if maintained.

nfib-121316-problem-tableAmong the issues that small business owners consider to be the biggest problems they face, this month also saw an interesting trend.  As shown in the table to the right, while Taxes and Government Red Tape are still the issues that pose the biggest problems for small businesses, both were cited by less than 20% of owners.  The last time both of these issues were below 20% was five years ago in November 2011.  While these two issues were cited by fewer business owners, inflation was the issue that saw the biggest increase.  Although at just 3%, it hardly seems to be a major concern at the moment.

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