U.S. Small Business Sentiment Softens

Across America, small businesses are feeling less confident about their future businesses and the economy as a whole.  The NFIB Small Business Optimism Business Index fell 1 point to 92.9, its lowest point in two years. The survey, which asks small business owners general questions about their attitude towards their own futures and the future of the economy from various perspectives, resulted in an increasingly negative index reading from January.

Across America, small businesses are feeling less confident about their future businesses and the economy as a whole.  The NFIB Small Business Optimism Business Index fell 1 point to 92.9, its lowest point in two years. The survey, which asks small business owners general questions about their attitude towards their own futures and the future of the economy from various perspectives, resulted in an increasingly negative index reading from January.

February’s survey highlighted a number of economic concerns that small business owners say are increasing pressure on them and their businesses.

Small businesses expect to invest less and hire less because of weakening economic conditions. Small business owners surveyed said they were less likely to increase employment or make capital outlays, which saw a 1 point and 2 point decline, respectively.

Lower real sales expectations are partly to blame, as expected real sales increase expectations fell by 3 points. Additionally, other aspects that were negatively impacted include current job openings (down 1 point), expansion expectations (down 2 points), and earnings trends (down 3 points).

Fewer sales, less activity, less hiring, and less hope for the future are characterizing America’s small businesses today.

“Treading Water”

The NFIB noted that the survey’s outcome was disappointing and showed “the small business sector is not headed up with any strength, just treading water waiting for a good reason to invest in the future.”.

“Spending and hiring plans weakened a bit as expectations for growth in real sales volumes fell. Earnings trends worsened a bit as owners continued to report widespread gains in worker compensation while holding the line on price increases (more firms cut prices than raised them),” said the NFIB.

Additionally, the moribund economic condition is partly a result of political uncertainty, which was cited as the second most often reason for the present being a bad time to expand, according to the NFIB.

Weak consumer sentiment, however, was also a factor in weak small business expectations. “University of Michigan’s Consumer Sentiment Index posted a modest decline, although reported spending for January was reasonably strong,” the NFIB said. “Still, more owners reported sales trending down than up, quarter on quarter. Expectations for future business conditions remained very negative, certainly not supportive of significant increases in hiring or capital spending.”

The labor market is increasingly hurting from weak hopes among small business owners. Owners also said that they are having trouble hiring workers and filling job openings. “Forty-nine percent reported hiring or trying to hire (down 3 points), but 42 percent reported few or no qualified applicants for the positions they were trying to fill. A lack of specific job related skills and a poor work history are disqualifiers that are expected,” said the NFIB.