The April National Federation of Independent Business (NFIB) Economics Trends Survey Optimism Index spiked up 2 points to 94.5, matching the post recession high of February 2011. While there is a strong uptrend as shown in the chart below, optimism still remains at what are traditionally recession levels.
Reviewing the data details reveals that a deteriorating political climate is the biggest drag on the index while the expectations on economic conditions have become significantly less negative.
The table below shows that there has actually been a slight decline in the number of respondents who stated this was a "good time to expand" in recent months to 7%, down from a post recession high of 10% in December 2012. This less than 1/3 of the 2005 pre-recession high of 25 and the recent downturn could indicate an coming economic downturn.
The reasons for rating this "not a good time to expand" reveal that there has been a significant decrease in the number of respondents concerned about "economic conditions" (44% in February 2011 versus 34% in April 2012) but a doubling of "political climate" from 7% to 14%. There has been very little change in the reasons for rating this a "good time".
In summary, the economic climate is still not perceived as a positive but is showing significant improvement. Without the negative political climate, the small business optimism index should be significantly higher.
Moderating the good news is the fact that government spending has been declining and has had negative effects on economic and job growth. If the deterioration in "political climate" reflects government spending rather than negative political campaigning, the overall Small Business Optimism index may start to decline again.
Overall, this is a stronger report than it appears at first and should be mildly positive for the market but not enough to offset any other negative news