Small-Business Owner Optimism Slides: NFIB

 
 
By Nathan Eddy  |  Posted 2013-04-12 Email Print this article Print
 
 
 
 
 
 
 

Job creation in the small-business sector was perhaps the only bright spot in the March report.

Small-business optimism ended its slow climb, declining 1.3 points and landing at 89.5 in the March index of the National Federation of Independent Businesses (NFIB), after three months of sustained growth, suggesting small-business owners are unable to maintain their positive feelings about growth and the U.S. economy. 

Of the 10 index components, two increased, two were unchanged and six declined. Among the greatest declines were labor market indicators, inventory investment plans and sales expectations. In the 44 months of economic expansion since the beginning of the recovery in July 2009, the index has averaged 90.7, putting the March reading below the mean for this period.

Job creation in the small-business sector was perhaps the only bright spot in the March report, as it was the fourth consecutive month of positive job growth. Owners reported increasing employment an average of 0.19 workers per firm in the month of March—the best reading NFIB has recorded in a year. For the 47 percent of owners who hired or tried to hire in the last three months, 36 percent (77 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions.

However, only 4 percent of owners surveyed characterized the current period as a good time to expand facilities, and the net percent of owners expecting better business conditions in six months was negative 28 percent, unchanged from February but 7 points better than December, the report found.

"After another false start, small-business confidence has sputtered and stalled again. For the sector that produces half the private GDP and employs half the private sector workforce—the fact that they are not growing, not hiring, not borrowing and not expanding like they should be is evidence enough that uncertainty is slowing the economy," NFIB chief economist Bill Dunkelberg said in a statement.

"Virtually no owners think the current period is a good time to expand, because they simply don't know what the future holds," Dunkelberg said. "So why invest? And with the lack of any sustainable fiscal policy or a federal budget, no one's banking that Washington will be at the forefront of any meaningful change. Overall, it appears that there will be little growth coming from the small business half of the economy; as the world economy slows, even big business may suffer."

When it comes to business investment, owners are still in what the report terms "maintenance mode." The frequency of reported capital outlays over the past six months rose one point to 57 percent, rising steadily since January, though by very small amounts. The percentage of owners planning capital outlays in the next three to six months was unchanged at 25 percent.

The report also found that with spending growth weak and excess capacity still widespread, there are few opportunities for small-business owners to raise prices. Seventeen percent of the NFIB owners reported reducing their average selling prices in the past three months (up 1point), and 18 percent reported price increases (down 3points). Seasonally adjusted, the net percent of owners raising selling prices was a negative 1percent, down 3 points. In the months to come, a net 17 percent of owners plan to raise average prices (down 6 points), the report said. 

 
 
 
 
 
 
 
 
 
 
 
 
 

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