Industry News | June 2, 2007

U.S. Small Business Confidence Index Rises 5 Points

The Small Business Research Board (SBRB) U.S. Small Business Confidence Index (SBCI) rose to 46 for the second quarter of 2007, a jump of 5.22 points from the previous quarter, according to a report issued here today co-sponsored by International Profit Associates (IPA).

Businesses in the Northeast, South and Midwest largely contributed to the increased confidence level. Each of those regions reported improved confidence indexes signifying their optimistic outlook for business improvement during the next 12 months.

The businesses in these regions are looking for improvements in the economy and greater revenue. They also will support their views with additional staffing.

IPA, based in Buffalo Grove, IL, has more than 1,800 professionals and is the largest privately-held provider of management consulting services to small and medium-size businesses in North America.

“The collective opinions expressed about improvements in outlook for the economy, sales increases and additional staffing are close parallels to what businesses have reported for the first four months of 2007,” said Gregg Steinberg, President of IPA. “Key sectors such as the housing industry and manufacturing have reported positive results despite concerns about weaknesses, be they regional and / or seasonal.”

Overall, 43% of respondents participating in the quarterly nationwide poll of small business owners and managers indicated hope for an improved economy. This was nearly a 3 percentage point increase from the prior study. Similarly, 58% are looking for increased revenue during the next 12 months versus the 53.71% that believed revenues would improve when the last study was completed. Of the respondents, 37% said they now plan to increase hiring as compared to 28.71% last time.

“For instance, the U.S. Census Bureau reports indicate that the sale of new homes rose 16.2% during April 2007 and far exceeded economists expectations. This growth lends validity to the continuing demand for attractively priced and promoted new housing. The 16.2% one month gain, the largest in 14 years, was aided by builder discounts and incentives that drove the average price down by nearly 11%,” added Steinberg.

“Concurrently, the Federal Reserve, the U. S. Department of Commerce and the Institute of Supply Management (ISM) have also issued positive reports about manufacturing. The Fed reported that industrial production reached a 2007 high in April, growing .7% from the previous month while the Commerce Department reported that orders for durable goods improved for the third straight month, rising .6% for April. The ISM said its April manufacturing index increased 3.8 points to 54.7 and indicates that the manufacturing economy is generally expanding,” said Steinberg.

The regional SBCI indexes moved accordingly. In the Northeast, the new SBCI reached 47.66 an increase from 40.36 while in the Midwest, the new index rose to 42.33 from 32.33. The SBCI in the South moved to 50 from 42.67.

The SBCI was only lower in the Western region, falling 3.82 points to 45.66. A drop off in plans for hiring was the greatest factor in the lower confidence index.

The latest SBRB poll said small businesses in the Northeast, South and Midwest will act upon these elevated expectations. Double digit percentage increases in predictions for hiring in these regions during the next 12 months support higher confidence levels. In the Northeast, 41% of the respondents said they have plans to increase hiring, a jump from 26.9% during the previous quarter. In the Midwest, 41% plan to increase hiring versus 18.01% and in the South 41% plan to boost hiring versus 29.5%.

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