Small Business Owner Optimism Has Not Shifted Much Since May

By October 8, 2013Economy

The National Federation of Independent Business (NFIB) said that small business owners’ sentiment declined marginally, down from 94.1 in August to 93.9 in September. In general, the Small Business Optimism Index has not shift by much since May, averaging 94.0 over that five month period. On the one hand, this continues to suggest improvement in perceptions since earlier in the year. For example, from November 2012 to March 2013, the five-month average was 88.9. Yet, the stall in sentiment growth after April is notable, particularly as it indicates some persistent challenges facing the sector.

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 had a reading over 100 was October 2006.

The percentage of respondents saying that the next three months were a “good time to expand” edged slightly higher from 6 percent to 8 percent. This was not far from the 7.6 percent average observed over the past five months. Economic worries and frustrations with the political environment were the main reasons cited by those saying it was not a good time for expansion. Respondents said that government regulations were the “single most important problem,” cited by 24 percent of those taking the survey. This was followed by taxes (18 percent) and poor sales (17 percent).

Looking at the various components, the data were mostly mixed. Sales and earnings continue to be weak; however, there was a gain in the net percentage of those expecting increased sales in the next three months, up from 5 percent to 8 percent. On the employment front, hiring was stagnant in September, with the net down from 4 percent to zero. The net percentage of small business owners planning to add workers in the next three months decreased from 10 percent to 9 percent, with that rate virtually unchanged since July.

Meanwhile, 25 percent of respondents plan to make capital expenditures over the next three to six months, the fastest pace since March. In addition, inventories continue to shrink, with a net two percent planning to decrease their stockpiles over the next three to six months.

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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