Small Business Owner Optimism Returned to Pre-Shutdown Levels in December

By January 14, 2014Economy

The National Federation of Independent Business (NFIB) said that small business confidence increased for the second straight month, up from 92.5 in November to 93.9 in December. This means that the Small Business Optimism Index has returned to where it was in September before the government shutdown. Similar trends were seen in consumer sentiment surveys from the Conference Board and the University of Michigan.

Small firm owners ended 2013 more upbeat than they started it, with the Optimism Index up 5.9 points since December 2012. Still, it is also clear that small business confidence remains subpar, with the Optimism Index well below 100 – its threshold for stronger activity. It has not exceeded 100 since October 2006, over seven years ago. The net percentage of those taking the survey who felt that the overall economy would be better six months from now was -11 percent; however, this was better than the -20 percent in November or the -30 percent observed in January 2013.

Looking specifically at the December data, 10 percent of respondents said that the next three months were a “good time to expand,” up from 6 percent in October and 9 percent in November. Of those saying that it was not the right time for expansion, political and economic concerns were paramount. Indeed, the “single most important problem” was taxes, cited by 23 percent of those completing the survey. This was followed by government regulations (20 percent), poor sales (14 percent), and the cost of insurance (10 percent).

Despite the uptick in the headline figure, the underlying data were mostly mixed. There was a marginal increase in the percentage of small business owners planning to make capital expenditures in the next three to six months (up from 24 percent to 26 percent), and the percentage with job openings has improved over the course of the year even as it was unchanged for the month (23 percent). On the other hand, the net percentage planning to make hires in the next three months was off slightly (down from 9 percent to 8 percent), and sales and earnings data remain weak. In addition, owners continue to suggest that inventory stockpiles are “too large.”

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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