US NFIB survey for March augurs well for company investment

Optimism among small US businesses failed to improve as expected in March, but some of the details of the report were well-received by analysts.

The National Federation of Independent Business’s small company sentiment index retreated from a reading of 92.9 for the month of March to a reading of 92.6.

Economists had forecast a reading of 93.5.

Nevertheless, a sub-index linked to economic expectations increased by four points to -17.0% and “would likely will climb further over the next couple of months if the market holds its current level,” Ian Shepherdson, chief US economist at Pantheon Macroeconomics, said in a research note sent to clients.

Another sub-index for firms’ investment intentions registered a two point rebound to 25.0%, undoing the previous month’s drop.

“The index [of companies' capital expenditure plans] is consistent with business capex, excluding mining equipment and structures - oil wells - rising by about 5% year-over-year. Hardly a boom, but not bad, especially as the drag from plunging mining capex is now beginning to fade and will be completely gone by the third quarter,” Shepherdson added.

Shepherdson also pointed out how core business capex had been following the NFIB measure quite closely in recent years.

Hence, March’s rebound in spending intentions was a “welcome development”.