U.S. small business confidence increased in April with owners in the energy field surprisingly bullish about capital expenditure and hiring plans, further supporting views that economic growth was rebounding after a dismal first quarter.
The National Federation of Independent Business said on Tuesday its Small Business Optimism Index rose 1.7 points to 96.9 last month. It is the latest sign the economy is clawing back after being slammed by a mix of bad weather, port disruptions, a strong dollar and deep spending cuts by energy firms.
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Nine of the index's 10 components rose last month, with the exception of sales. Employment and consumer sentiment data have suggested a pick-up in growth momentum at the start of the second quarter, but the dollar and lower oil prices continue to weigh on manufacturing.
"In spite of the dramatic reversal of economic activity in the energy sector, owners in the shale states remained substantially more aggressive than their counterparts in the other states," the NFIB said in a statement.
Energy companies have slashed capital spending budgets and laid off thousands of workers as lower energy prices undermine exploration and drilling activity.
The NFIB survey of 1,500 firms found that 60 percent reported capital outlays, up two points. Of those making expenditures, 44 percent said they had bought new equipment, up four points. About 26 percent of owners planned capital outlays in the next 3 to 6 months, up 2 points.
This bolsters views the bulk of the energy spending cuts were front loaded into the first quarter. The government reported last month that mining exploration, shafts and wells spending plunged at a 48.7 percent annual pace in the first quarter.
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That contributed to holding down gross domestic product growth to a 0.2 percent rate, according to the government's advance estimate. Data on trade and wholesale inventories, however, suggest the economy contracted in the first three months of the year.
The NFIB survey also found an increase in the number of owners planning to increase inventory investment and saying stocks were too low. This could be a positive for growth in the second-quarter after businesses amassed huge stocks of goods at the start of the year, which was seen as at least partly unintended.
Owners, however, were downbeat on sales, but surprisingly optimistic about earnings.
The survey's labor market indicators showed further signs of jobs market tightening. There was an increase in the share of owners saying they could not find qualified workers for open job positions.