Index: Small business optimism picks up

A monthly index tracking optimism among small business owners has increased for the first time in seven months, but the latest results don’t reflect any significant change in outlook.

The National Federation of Independent Business reported that it’s Small Business Optimism Index gained eight-tenths of a point to rise to 88.9. The gain snapped a six-month string of declines.

The index is based on the results of monthly surveys of members of the NFIB, a small business advocacy group based in Washington, D.C.

Bill Dunkelberg, chief economist of the NFIB, said an increase in consumer spending would help small businesses more than proposed jobs legislation. “Promising temporary tax cuts financed by permanent income tax increases will not help many small business owners who pay taxes based on personal — not corporate — tax rates,” Dunkelberg said. “The key to economic recovery is restoring the confidence of consumers. Only then will small businesses begin to see the sales they need to expand. If consumers fear the path we are on, then ‘less is more’ policies that reduce the size of government will increase confidence.”

The proportion of small business owners responding to the September survey who expect improving conditions in six months rose four points, but remains at a negative 22 percent.

The proportion of owners reporting capital outlays over the past six months fell two points to 50 percent. The share of owners who expect to make capital outlays in the next three to six months fell a point to 20 percent, a reading that reflects recession rather than recovery. Only 6 percent of owners said now is a good time to expand, up one point from August.

Access to capital isn’t a problem, with 92 percent of owners reporting their credit needs were met or they weren’t interested in borrowing. The proportion of owners expecting credit conditions to ease in coming months rose a point, but remains at a negative 12 percent.

 A net negative 1 percent of owners reported their inventories were too low, down two points. The share of owners who plan to increase inventories rose three points, but remains at a net negative 2 percent.

While 14 percent of owners reported unfilled job positions, 11 percent plan to increase staffing over the next three months. Both proportions are down a point.

Poor sales remain the biggest problem, small business owners reported in their survey responses. The proportion of owners reporting higher sales over the past three months fell a point to a net negative 10 percent with more owners reporting declines than increases. The share of owners who expect higher sales rose six points, but remains at a net negative 6 percent.

A net negative 27 percent of owners reported positive earnings trends, down a point, with more owners reporting falling profits than rising profits.