Economist: Small business optimism “stagnant”

William Dunkelberg
William Dunkelberg

A monthly measure of confidence among small business owners has edged up on expectations of improving economic conditions and increased capital outlays and inventories.

But at 96.1, the September reading of the Small Business Optimism Index compiled by the National Federation of Independent Business still remains below the long-term average of 98. The index rose two-tenths of a point in September after a half-point gain in August.

“Small business optimism continues to be stagnant, which is consistent with the expected economic growth of about 2.5 percent,” said Bill Dunkelberg, chief economist of the NFIB.

Owners didn’t appear overly concerned with recent volatility in the stock markets even though that volatility tends to create uncertainty, Dunkelberg said.

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group. For September, seven of 10 components of the index advanced, while three retreated.

The proportion of small business owners responding to the survey upon which the September index was based who said they expect the economy to improve rose two points. But at a net negative 4 percent, more owners anticipated worsening than improving conditions.

The share of owners reporting plans to increase capital outlays over the next three to six months rose a point to 25 percent. Meanwhile, 12 percent of owners said they consider now a good time to expand, up two points.

The proportion of owners who said they expect to increase inventories climbed two points to 3 percent. The share of owners who said their existing inventories are two low rose a point to a net negative 6 percent.

A net 12 percent of owners said they plan to increase staffing, down a point but a level still indicative of job growth, Dunkelberg said. At the same time, 27 percent of owners reported hard-to-fill job openings, down two points.

Sixteen percent of owners cited difficulty in finding qualified workers as the most important problem facing third businesses, third behind taxes and government regulations. “This is the highest reading since 2007 and suggests that employers will continue to face wage pressure in order to attract and keep good employees,” Dunkelberg said.

The share of owners who said they expect higher sales fell six points to 1 percent. At the same time, 11 percent of owners cited poor sales as their most pressing business problem, fourth among the most-cited concerns.

The proportion of owners reporting higher earnings rose two points. But at a net negative 13 percent, more owners reported profits were lower quarter to quarter than higher.