Small Business Owner Sentiment Edged Slightly Lower in June

By July 9, 2013Economy

The National Federation of Independent Business (NFIB) said that small business owners’ sentiment declined slightly, down from 94.4 in May to 93.5 in June. Even with this month’s lower figure, it is clear that small businesses have become more optimistic in the past few months, with an average Small Business Optimism Index of 93.3 in the second quarter of 2013 versus an average of 89.7 in the first quarter. This could suggest an upward trend. But, we should also caution that the index’s average in the first half of 2012 was also 93.5, but it declined significantly in the second half of the year to 90.9 as we approached the fiscal cliff and had slower sales growth both domestically and globally.

This is not to suggest that we will have a similar fate this year, as other surveys have indicated some cautious optimism about the second half of 2013. Still, the data show that uncertainties continue to persist for small business leaders. The net percentage of respondents expecting sales to increase over the next three months fell from 8 percent to 5 percent, with continued weakness in earnings. In addition, the net percentage saying that the next three months are a good time to expand dropped from 8 percent to 7 percent. (It is still higher than the 4 percent observed in April.)

The main reasons cited for those suggesting that the next three months were not a good time to expand were economic conditions and the political climate. The single most important problems in this survey were taxes and government regulations, with each garnering 20 percent of the responses. The next closest concern was poor sales, a proxy for the economy.

The data did provide some positive news on hiring, which is welcome. The net percentage of those planning to add employees in the next three months increased from 5 percent to 7 percent, its fastest pace since August and a definite improvement from the zero reading in March.

Similarly, capital spending plans for the next three to six months were unchanged, with 23 percent of respondents planning to make a capital expenditure. This figure has averaged 23.3 percent so far in the first six months of 2013, marginally higher than the 22.2 percent average for all of 2012. This suggests a slight pickup in investment spending in recent months, starting with the February report.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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