Small business confidence has risen and remains at a high level, according to the latest CNBC survey | Q2 Small Business SurveyMonkey. The CNBC Small Business Confidence Index | Survey Monkey’s 59 (up from 58 in Q1 2019) indicates that small business owners are optimistic about the direction of their business over the next 12 months.
“Business is feeling pretty good, the economy is doing well, and confidence is still at high levels,” said Todd McCracken, president and CEO of the National Small Business Association.
Two key survey questions showed the most confidence since the third quarter of 2018. Fifty-six percent of small business owners describe business conditions as good, while 60% say they expect revenue to increase over the next next year. The percentage of small business owners who expect revenue to decline (6%) is at its lowest level since the first quarter of 2018. The percentage of owners who describe business conditions as poor (5%) was also a low in the history of the survey.
Larger companies (those with 50 or more employees) are particularly optimistic, with 77% describing business conditions as good and only 1% saying conditions are poor.
The Small Business Confidence Index of 59 is three points below its all-time high of 62, which was recorded in the first quarter of 2018 and the third quarter of 2018. The CNBC | SurveyMonkey Small Business Survey for the second quarter included responses from 2,100 small business owners collected between April 15 and April 22.
Tax cuts and the labor market
The stock market has soared for most of 2019 – the survey came before the latest trade war headlines sent stocks plummeting this week. The Fed is signaling that economic conditions remain solid, but it currently has no plans to raise rates, which could dampen enthusiasm. Yet small business confidence has yet to reach its all-time high of 2018.
Diminishing benefits from the 2017 tax cuts and competition for workers are likely factors weighing on business prospects.
“Most small businesses know they’re temporary, and some are already on the verge of starting to phase out,” McCracken said. “With power divided in Washington, businesses know that not much will happen to change that. Congress needs to take proactive steps to ensure these tax cuts stay in place beyond the two next three years.”
The percentage of small business owners who said tax policy would be positive for their business over the next 12 months fell to 28%, the lowest level in the survey’s history. Business owners saying tax policy will be negative for their business over the next 12 months rose from 29% to 35% in the second quarter. Thirty-nine percent of small business owners expect no impact from tax policy.
He said the labor market is an inevitable by-product of the strength of the economy. “That’s the nature of a strong economy – when you’re fully employed, that’s what happens.”
The majority of small businesses neither expect to increase nor decrease their full-time staff (63%), a number that has fluctuated between a low of 59% in the third quarter of last year and a high of 64% in the last trimester.
The labor market can have the greatest influence on the smallest businesses.
“The unique problems that companies face are more important. Large companies have more ability to survey the market and find people, but small companies have a lack of information in terms of finding employees and finding people. employees to find them,” McCracken said. “A lot of small businesses have to train their workers, which is a big investment. If they leave in a year or six months, the companies don’t get reimbursed.”
Sixty-five percent of companies with 50 or more employees say they expect to increase their workforce over the next year, compared to just 19% of companies with four or fewer employees. The biggest gap exists between the smallest and largest small businesses. Among companies with five to nine employees, 46% plan to increase their workforce; 44% of companies with between 10 and 49 employees plan to increase their staff.
The CNBC Investigation | SurveyMonkey Small Business Survey for the second quarter was conducted with 2,100 small business owners between April 15 and April 22. The survey is conducted quarterly using SurveyMonkeyof the online platform and on the basis of its survey methodology.