Index: Small business owners less upbeat

A monthly index tracking optimism among small business owners has dropped on less upbeat expectations for improving conditions and hiring.

The National Federation of Independent Business reported that its Small Business Optimism Index dropped more than two points in October to 91.6. The latest reading is more than eight points below the pre-recession average for the index as well as the levels typically recorded during a recovery.

The index is based on monthly surveys of members of the NFIB, a small business advocacy group.

A partial federal government shutdown and implementation of the Affordable Care Act contributed to the October decline, said Bill Dunkelberg, chief economist of the NFIB.

“Washington paralysis is never good news for the economy. So it was no surprise that while politicians were arguing over whether or not the government should remain fully operational, small business optimism measures deteriorated,” Dunkelberg said.

The outlook isn’t much better, he added: “The new budget deadline of Jan. 15, 2014 is approaching quickly and Congress continues to wrangle over the disastrous health care law and little else. We shouldn’t expect skies to turn blue anytime soon.”

For October, seven of 10 components of the index retreated, while two components edged up and one remained unchanged.

The share of small business owners responding to the survey upon which the October index was based who expect the economy to improve over the next six months tumbled seven points to a net negative 17 percent, meaning more owners anticipate worsening conditions than improving conditions.

The proportion of owners who plan to increase staffing fell four points to 5 percent, although 21 percent of owners reported hard-to-fill job openings, up a point from September.

The share of owners planning capital outlays over the next three to six months retreated two points to 23 percent. Meanwhile, 6 percent of owners characterized now as a good time to expand, also down two points.

A net negative 1 percent of owners reported plans to increase inventories, down a point. A net negative 5 percent of owners reported current inventories as too low, the lowest reading since 2011.

Just 2 percent of owners said they expect higher sales, down six points. The proportion of owners who expect higher earnings remained unchanged at a net negative 23 percent.