Signs of Better Times for Small Business

According to the December 2010 NFIB Small Business Economic Trends, the sentiment among surveyed small business owners is up to the highest level in 34 months.

The survey also shows improvement in expectations for economic performance as well as increases in plans to hire, make capital outlays, and invest in inventories. However, the optimism index indicates that we’re still in recession territory even though the recession technically ended in June 2009.

Small business optimism is not the only positive indicator of better times. The National Retail Federation revised its holiday shopping forecast to a gain of 3.3% over last year. While not a dramatic improvement, it shows things are moving in the right direction.

The tax package, which passed the Senate on December 15, will introduce a small measure of certainty for the next year or two. The package keeps tax rates on individuals, capital gains, and dividends from rising; most small business owners pay tax on their business profits on their personal returns. It also extends a number of helpful tax rules, including the research credit, so that businesses can make spending plans with tax breaks in mind.

Inflation continues to be low; it’s running at about 1.1% for 2010. This will keep interest rates on borrowing low, at least for the time being.

Bottom line: Taking together these varied sentiments, actions, and statistics, it indicates that the worst of the economy is likely behind us and the best is yet to come.

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