Small Business Optimism Virtually Unchanged in August

By September 10, 2013Economy

The National Federation of Independent Business (NFIB) said that small business owners’ sentiment declined marginally, down from 94.1 in July to 94.0 in August. This suggests that perceptions have not shifted much over the past few months, with the Small Business Optimism Index averaging 94.0 over the past four months (May to August). This compares to an average of 90.3 for the first four months of 2013 (January to April). So, while small businesses were more confident in August than earlier in the year, growth in optimism appears to have stalled more recently.

Beyond that, the index remains below 100, its threshold for stronger growth in the small business sector. This means that small business owners continue to worry about weaknesses in the economy. The last time the NFIB’s index has a reading over 100 was October 2006.

The percentage of respondents saying that the next three months were a “good time to expand” declined from 9 percent to 7 percent. Of those saying that it was not a good time for expansion, the economy and political environment were the main reasons. Respondents said that higher taxes were the “single most important problem,” cited by 23 percent of those taking the survey. This was followed by government regulations (21 percent) and poor sales (17 percent).

On this latter item, those surveyed suggested that both earnings and sales were lower in the prior three months, with both figures dropping sharply in August. For instance, the net percentage of actual sales (e.g., those saying it was higher minus those saying it was lower) declined from -7 percent in July to -24 percent in August. The good news was that respondents were more positive about the next three months, with the net percentage of sales expectations increasing from 7 percent to 15 percent.

Employment followed a similar pattern. Over the past three months, the net percentage of actual hiring declined from -1 percent to -3 percent. Yet, net hiring expectations for the next three months were more upbeat, up from 9 percent to 16 percent.

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), 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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