US small business optimism holds up in January, NFIB says

Small US businesses were less optimistic at the start of the year, but not overly so, according to the results of a widely-followed survey.

The National Federation of Independent Businesses's index of Small Business Optimism retreated by 1.3 points to 93.9 in January (consensus: 94.5).

However, while expectations for business conditions and expected real sales volumes weakened further, actual spending and hiring numbers "held up pretty well as the real economy plods forward," the NFIB said.

Indeed, plans to create jobs maintained "respectable levels (for this recovery)" while reports that job openings were "hard-to-fill" increased to expansion-high levels.

The difference between the number of firms planning to take on more staff and those preparing to reduce their workforces fell from 15% in December to 11% in January, the NFIB added.

A similar gauge tracking how many companies expect the economy to improve dropped by six points to -21%.

In parallel, more owners reported cutting average prices rather than raising them, while reports of higher compensation increased to expansion-high levels.

"As a further indication of labor market tightness, the share of firms raising compensation hit a new post-recession high in January (27%, previous: 22%), consistent with the 0.5% m/m gain in average hourly earnings. While fewer firms plan to raise compensation in the coming months (15%, previous: 21%), the combination of falling output prices (-4%, previous: -1%) and rising labor costs indicates downside risks to corporate profit growth," Barclays's Jesse Hurwitz said in a research report sent to clients.

"From the perspective of labor markets, this morning’s data suggest the US economy remains on track."