'The engine of the economy roared back to life': US small business confidence hit a record-high in 2017

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  • The Small Business Optimism Index from the National Federation of Independent Businesses came in at 104.9 in December.
  • The average monthly reading for the index in 2017 was 104.8, the highest for any year in its history.
  • Both the NFIB's CEO and chief economist attributed the boost in confidence to policy changes under the Trump administration.

Small-business confidence hit a record high in 2017, according to the National Federation of Independent Businesses.

The National Federation of Independent Businesses on Tuesday released its Small Business Optimism Index for, capping "an all-time record setter" of a year in 2017, according to the right-leaning lobbying group.
The optimism index came in at 104.9 in December. According to the NFIB, the index's average monthly level was 104.8 in 2017, the highest in the history of the the survey.

Juanita Duggan, the president and CEO of the NFIB, pinned the increase in optimism on policy changes from Washington under President Donald Trump.

"With a massive tax cut this year, accompanied by significant regulatory relief, we expect very strong growth, millions more jobs, and higher pay for Americans," Duggan said in the release.

NFIB Chief Economist Bill Dunkelberg also credited Trump's election for the surge in optimism.

"The 2016 election was like a dam breaking," Dunkelberg said. "Small business owners were waiting for better policies from Washington, suddenly they got them, and the engine of the economy roared back to life."The NFIB, a lobbying group, came out against the original version of the Republican tax bill, saying it would not be wholly beneficial to small business owners.

But after changes that made the tax cut more generous for owners of entities known as pass-through businesses, in which the owner of the business books profits as their personal income, the NFIB supported the final version that became law.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that while the group's headline number remained encouraging, some of the underlying trends for owners' actual spending intentions remained lagging.

Shepherdson noted that the percentage of owners saying they were actually increasing capital expenditures - making large investments in their businesses - remained near a nine-month low in November.

"The index strengthened in the spring and early summer but then dropped immediately after the hurricanes," Shepherdson wrote. "Its failure then to rebound is disconcerting and hard to explain, but at least it appears no longer to be falling. Still, we need to see stronger numbers over the next few months if the story of sustained strength in capex this year is to materialize."

The NFIB survey is one of a slew of readings that have improved this year, along with consumer confidence and manufacturer surveys from the various Federal Reserve branches.

So far the dramatic increase in survey confidence has caused a solid increase in economic activity, but not a dramatic increase beyond the long-term trend for the post-recession recovery.