Dive Brief:

• Optimism among owners of small businesses soared last month to the highest level in more than three years, fueled by expectations that President-elect Donald Trump will push through pro-growth regulatory and tax policies, the National Federation of Independent Business said Tuesday.
• The portion of small business owners anticipating an improvement in the economy rose to the highest level since June 2020, while the share believing that now is a good time to invest in their business hit the highest reading since June 2021, the NFIB said, describing results of a monthly survey.
• “The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Owners are particularly hopeful for tax and regulation policies that favor strong economic growth as well as relief from inflationary pressures,” he said, noting that “small business owners are eager to expand their operations.”

Dive Insight:

Trump’s win at the ballot box last month coincided with several signs of vitality and optimism, including above-trend economic growth, solid consumer spending and record-high stock prices.

Gross domestic product — defying predictions of a slowdown this year — grew at annual rates of 1.4% in the first quarter, 3% in Q2 and 2.8% in Q3, according to the Bureau of Economic Analysis.

During the current quarter, the economy will likely expand 3.3%, according to a forecast by the Atlanta Fed released Monday.

Like their counterparts at small businesses, leaders of the largest U.S. companies see good times ahead, the Business Roundtable said Tuesday, reporting on its CEO Economic Outlook Survey for Q4.

The Business Roundtable’s composite index measuring CEO plans for capital spending, employment and expectations for sales during the next six months hit the highest level in more than two years, the organization said, reporting on its quarterly CEO Economic Outlook Survey.

“With Washington poised to consider measures that can protect and strengthen tax reform, enable a sensible regulatory environment and drive investment and job creation, business leaders are energized by the opportunity to engage the incoming administration and Congress on policies that can further fuel our economy,” Cisco CEO Chuck Robbins said in a statement. He also serves as chair of the Business Roundtable.

Among small business owners, their one-month increase in optimism from October until November is the biggest jump since the start of the NFIB index in 1986, and more than double the monthly gain after Trump’s first presidential election win in 2016, Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said.

“Right now, small businesses surely are cheering Mr. Trump’s plans to reduce the corporate tax rate for American-based businesses without foreign ties to 15% from 21%, and to lessen the burden of regulations,” he said Tuesday.

Yet the outlook is not without risks, Tombs said in an e-mail to clients.

“Tariffs and deportations threaten to lift small businesses’ costs and weigh on overseas sales, if other countries retaliate,” Tombs said. “The risk that the mood among small businesses quickly sours is high.”

Moreover, high borrowing costs thwart expansion plans for many small businesses, he said, noting that the 8.8% average interest rate on short-term loans last month far exceeded nominal sales growth.

“External finance remains so expensive to obtain that few small businesses will seek to expand soon,” Tombs said.