WASHINGTON (Reuters) - Confidence among U.S. small businesses rose in January as owners anticipated better business conditions in the next six months, despite higher taxes and looming government spending cuts.

The National Federation of Independent Business said on Tuesday its optimism index increased 0.9 percentage point to 88.9 last month, pulling further from a 2-1/2 year low hit in November.

The improvement in sentiment came even as a payroll tax cut expired on January 1. Big automatic spending cuts are also set to take hold in March unless the U.S. Congress acts.

Owners' outlook for business conditions in the next six months improved five points. There were also modest improvements in their views on profits, sales, credit availability and capital investment.

Even more encouraging was a gain in the share of owners creating jobs and those reporting difficulties filling job openings.

However, few owners are convinced this is a good time to expand their operations and there is little urgency to add inventories.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)