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1Q Small Business Optimism Highest in 34 Years, Economic Growth Ahead

Feb 20, 2018

Two of the most pressing concerns for small businesses are taxes and government regulations, both issues have been in focus recently. The recently instituted tax cut plan, along with the belief that future policy changes will be implemented to ease business restrictions, have been contributing factors to the surging small business optimism. This is the core topic explored by Gene Epstein in his Barron’s article titled “Small Business Optimism Signals Economic Growth Ahead”. If these factors are truly instrumental in affecting small business sentiment is subject to debate. There are clearly factors influencing the small business confidence index as shown by the first quarter score of 106.9-his is the highest level of confidence for the first quarter in 34 years.

The strong confidence level is an encouraging sign for first quarter GDP growth. There is the belief among many that GDP growth will reach or surpass 3%, building on the annualized 3% growth rate for 2017. Strengthening small business confidence is a positive development and while it is difficult to narrow a specific cause for increased confidence, there is evidence to support the notion of President Trump’s policies as a cause. Under President Barack Obama’s term, the index struggled at a level of nearly 95 throughout much of his time in office.

There has been fear that the economy has been overheating and be headed for a corrective balancing event. If the results of the small business confidence index are accurate, however, there may be further economic expansion. Whether the result of tax cuts, deregulation, or some other more obscure factor, it would seem small businesses feel growingly confident of their standings.

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