Photographer: Daniel Acker/Bloombergby Luke Kawa
President-elect Donald Trump's victory in the U.S. elections is a giant leap for small businesses, according to a survey of their owners.
The November reading of the National Federation of Independent Businesses' small business optimism index jumped to 98.4 from 94.9 — its sharpest surge since 2009 — with all of the increase in sentiment coming after the U.S. elections held on Nov. 8.
“This month we bifurcated the data to measure the results before and after the election,” explained Chief Economist Bill Dunkelberg. “The November index was basically unchanged from October's reading up to the point of the election and then rose dramatically after the results of the election were known.”
Among those who were surveyed following the election, the balance of opinion on whether business conditions were expected to improve skyrocketed from a reading of -6 to a whopping +38.
For the month as a whole, this subindex improved to 12, from -7, to reach its highest level since 2014. Similarly, the balance of opinion on sales expectations jumped by 10 percentage points to +11.
"Small businesses like unified Republican government," said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC, who highlighted that the NFIB's index fell in November 2012 — when Obama won re-election — but recorded a solid rise in November 2004 after voters granted George W. Bush a second term.
On a relative basis, Trump's plan to cut corporate taxes offers the most benefit to firms that earn more revenues domestically — a category most small businesses fall into. The possibility that Linda McMahon, who Trump nominated to lead the Small Business Administration, might roll back regulation and help fulfill the real-estate mogul's pledge to repeal Obamacare also contributed to higher optimism among small business owners, said Dunkelberg.
The vast majority of segments that showed improvements in November's survey were forward-looking in nature; on both actual sales and earnings changes, the balance of opinion remained steeply negative.
The NFIB reading is the latest in a number of gauges tracking sentiment in the U.S. economy to have soared since the election, including the University of Michigan's December report which showed that consumers' assessment of current government economic policy rose to its highest level since 2009.