Small-Business Confidence Stagnates: NFIB

As consumer spending remains weak, so do the expectations for real sales among small employers.

On the eve of the President’s State of the Union address, the National Federation of Independent Businesses (NFIB) released its latest Small Business Optimism Index, which indicated small-business owner confidence continues to drag.

The index attributes its results to the threat of higher taxes, rising health insurance costs, increasing regulations and overall economic uncertainty.

While actual job creation and job-creation plans improved nominally, they were still not enough to keep up with population growth, and although expectations for improved business conditions increased by five points, they remain overwhelmingly low at negative 30 percent--the fourth lowest reading in survey history.

“The Optimism Index barely budged in January. The only good news is that it ‘budged’ up, not down. If small businesses were publicly traded companies, the stock market would be in shambles. While corporate profits are at record levels as a share of GDP, small businesses are still struggling to turn a profit,” NFIB chief economist Bill Dunkelberg said n a prepared statement. “With the dismal news that our economy actually contracted in the fourth quarter of 2012, it isn’t any wonder that more small firms expect their real sales volumes to fall, few have plans to invest in new inventory, and hardly any owners are expanding or hiring.”

On the job-creation front, 43 percent of owners surveyed said they hired or tried to hire in the last three months and 34 percent (79 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions. Overall job creation was positive in January, but “ever-so-slight,” with just 11 percent of surveyed owners adding employees over the past few months, and 9 percent said they reduced employment.

As consumer spending remains weak, so do the expectations for real sales among small employers. Sales trends remain overwhelmingly negative for small employers, with still more owners reporting declining sales than experiencing positive sales trends. Nearly one-fifth (19 percent) of business owners surveyed cited weak sales as their top business problem.

Overall, there was no sign that capital spending might be returning to levels more consistent with past recovery periods, with 21 percent of owners planning to make capital outlays in the next three to six months. The net percent of owners expecting better business conditions in six months was a net negative 30 percent, 5 points better than December but still dangerously low—the fourth lowest reading in nearly 40 years. Of those making expenditures, 39 percent of owners reported spending on new equipment (up 3 points), 21 percent acquired vehicles (up 3 points), and 12 percent improved or expanded facilities (down 1 point).