(Reuters) - A gauge of U.S. small business confidence rose to a 12-year high in December as optimism about the economy intensified among business owners following the November election, the National Federation of Independent Business said on Tuesday.
The group's index of small business confidence rose to 105.8, its highest since December 2004. It was up 7.4 points from the prior month, which was its biggest monthly increase since the 14.52 point increase in July 1980.
“The December results confirm the sharp increase that we reported immediately after the election,” NFIB's chief economist Bill Dunkelberg said in a statement.
“In this month’s report, we are also finding evidence that higher optimism is leading to increased business activity, such as capital investment,” Dunkelberg added.
Consumer and business sentiment about the economy has risen sharply based on the notion the incoming administration of Republican President-elect Donald Trump and a Republican-controlled Congress would enact big tax cuts and infrastructure spending and loosen regulations, which would boost spending and investments.
"The NFIB membership appears to be disproportionately Republican, so it is possible that the data will start overstating strength, opposite the pattern during the Obama administration. In general, however, confidence measures have been moving up," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.
Meanwhile, independent business owners were reluctant to hire more workers in December despite the burst of post-election optimism, NFIB said.
Job creation edged up by 0.01 workers per firm and job openings fell 2 points, according to NFIB jobs data released last week. It showed small business owners have struggled to find qualified workers.
"That’s good news for workers because they can command higher compensation, but many small business owners aren’t yet confident enough to raise prices to offset the higher labor costs," Dunkelberg said.
Reporting by Richard Leong in New York; Editing by Jeffrey Benkoe