Index: Small business owners less upbeat

A monthly measure of optimism among small business owners has dropped on less upbeat expectations for hiring, sales and the overall economy.

The National Federation of Independent Business reported that its Small Business Optimism Index fell 2.7 points in February to 91.4, a reading historically associated with recession, not recovery.

The index is based on the results of monthly surveys of members of the small business advocacy group. For February, six of 10 components of the index retreated, including those tracking the outlook for hiring, sales and the economy.

“As disturbing as the decline in job creation plans was, the plunge in expectations for improvements in real sales in the coming months and for business conditions six months from now show that we shouldn’t expect blue skies soon,” said Bill Dunkelberg, chief economist of the NFIB.

Dunkelberg blamed the declines on continued uncertainty about the economy and federal policies. “As long as uncertainty remains high, owners will remain cautious when it comes to increasing inventory.

Business owners aren’t going to bet their money on a future they cannot see clearly.”

The share of small business owners responding to the survey upon which the February index was based who plan to increase staffing fell five points to a net 7 percent. Still, a net 22 percent of owners reported hard-to-fill job openings, unchanged from January.

The Labor Department estimated that nonfarm payrolls increased 175,000 in February, although the unemployment rate crept up a tenth of a point to 6.7 percent. “The February report on net new jobs was better than expected, but inadequate to the task of reducing the unemployment rate,” Dunkelberg said.

The proportion of owners who expect higher sales volume dropped 12 points to a net 3 percent. Meanwhile, 16 percent of owners cited weak sales as their most pressing business problem.

The share of small business owners who said they expect the economy to improve over the next six months declined eight points to a net negative 19 percent, a reflection of more pessimistic than optimistic responses.

The only component of the index to advance for February was the reading for capital outlays. A net 25 percent of owners reported plans to increase capital spending over the next three to six months, up a point. Still, the proportion of owners who characterized now as a good time to expand fell two points to a net 6 percent.

The share of owners who expect to increase inventories fell two points to a net negative 5 percent.

Reports of positive earnings trends remained unchanged at a net negative 27 percent.