The NFIB Optimism Index remained at 104.0 in October, unchanged from September and a historically high reading. Four of the 10 components improved, five declined and one was unchanged. Although all of the data was collected prior to Election Day, a six-point increase in the NFIB Uncertainty Index to 98 was likely driven by the election and uncertain conditions in future months due to the COVID-19 pandemic and possible government-mandated shutdowns. The uncertainty reading was the highest reading since November 2016.

“Leading up to the presidential election, small businesses continued to focus on stabilizing their businesses but were uncertain about the future economic conditions due to COVID-19 government regulations on all levels,” said NFIB Chief Economist Bill Dunkelberg. “We see solid momentum going into the 4th quarter, and another good quarter could get the GDP back to its 2019 closing levels.”

Other key findings include:

• Earnings trends over the past three months improved 9 points to a net negative 3 percent reporting higher earnings.
• Earnings trends have improved to pre-crisis levels, up 32 points since June.
• Inventory investment plans for the next three to six months increased 1 point to a net 12 percent, a record high.
• Real sales expectations in the next three months increased 3 points to a net 11 percent expecting gains.
• Owners expecting better business conditions over the next six months declined 5 points to a net 27 percent.

As reported in NFIB’s monthly jobs report, small business owners are looking to hire, reporting a historically high level of job openings in October. Overall, 55 percent of owners reported hiring or trying to hire in October, down 1 point from September. Thirty-three percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 3 points from September’s report.

Unchanged from last month, a net 23 percent (seasonally adjusted) reported raising compensation and a net 18 percent plan to do so in the coming months, up 2 points. Eight percent cited labor costs as their top business problem (down 1 point) but 22 percent said that labor quality was their top business problem, exceeding taxes, regulations, and weak sales. Thirty-five percent in construction report finding qualified workers as their top issue, slowing new home production.

Fifty-three percent of owners reported capital outlays in the last six months, unchanged from September. Historically, this is a poor performance because it doesn’t boost current GDP and it impairs the future growth in worker productivity and pay.

Of those making expenditures, 36 percent of owners reported spending on new equipment (down 2 points), 20 percent acquired vehicles (down 3 points), and 16 percent improved or expanded facilities (unchanged). Five percent acquired new buildings and land for expansion (up 1 point), and 12 percent spent money for new fixtures and furniture (up 4 points). Twenty-seven percent plan capital outlays in the next few months, down 1 point from September.

Small businesses have continued to see improvements in foot traffic and sales with a net 6 percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months, an improvement of 12 points from September. The net percent of owners expecting higher real sales volumes increased 3 points to a net 11 percent of owners.

The net percent of owners reporting inventory increases rose 2 points to a net negative 5 percent. Consequently, the net percent of owners viewing current inventory stocks as “too low” remained at record levels, falling only 1 point to 4 percent. The net percent of owners planning to expand inventory holdings increased from September by 1 point to a net 12 percent, a record high. Inventories continue to be low and are being rebuilt as supply chains are restored.

Seasonally adjusted, the net percent of owners raising average selling prices rose 2 points to a net 15 percent. Unadjusted, 10 percent (down 1 point) reported lower average selling prices, and 23 percent (unchanged) reported higher average prices. Price hikes were the most frequent in retail (26 percent higher, 7 percent lower) and wholesale (21 percent higher, 13 percent lower). Seasonally adjusted, a net 20 percent plan price hikes (up 3 points). The frequency of average price increases above 10 percent remained high.

The frequency of positive profit trends rose 9 points to a net negative 3 percent reporting quarter on quarter profit improvement. Among owners with weaker profits, 52 percent blamed weak sales, 8 percent cited usual seasonal change, 7 percent cited labor costs, and 6 percent cited lower prices. For owners reporting higher profits, 70 percent credited sales volumes and 10 percent cited usual seasonal change.

Three percent of owners reported that all of their borrowing needs were not satisfied (up 1 point), 29 percent reported all credit needs were met (down 4 points), and 56 percent said they were not interested in a loan (up 1 point). A net 3 percent reported their last loan was harder to get than in previous attempts (up 1 point).

Only one percent of owners reported that financing was their top business problem, unchanged from last month. The net percent of owners reporting paying a higher rate on their most recent loan was negative 6 percent, up 4 points from September, indicating that borrowers are seeing the benefits of low interest rates being passed along in the form of lower loan rates. Twenty-five percent of all owners reported borrowing on a regular basis (up 1 point).

View the NFIB Small Business Economic Trends Survey.