Index: Small business owners less upbeat

William Dunkelberg
William Dunkelberg

A monthly measure of optimism among small business owners has retreated on less upbeat expectations for economic conditions, hiring and sales.

The National Federation of Independent Business reported that its Small Business Optimism Index fell 1.3 points to 93.9 in January. The index remains well below its historical average of 98.

“Neither the tumultuous stock market nor the Federal Reserve rate hike had much of an influence on this month’s drop in small business owner optimism,” said William Dunkelberg, chief economist of the NFIB. “Most of the decline was accounted for by expected business conditions in the next six months and the expected real sales. These expectations are important determinants of decisions to hire, to expand and to order new inventory, all drivers of the economy.”

“The labor market continues to show strength that is driven by the core growth in the economy that results from a growing population. But uncertainty continues to cloud the future,” Dunkelberg said.

The index is based on the results of monthly surveys of members of the small business advocacy group, most of them business owners. For January, six of 10 components of the index decreased, while three increased and one remained unchanged.

The proportion of small business owners responding to the survey upon which the January index was based who expect the economy to improve over the next six months fell six points. At a net negative 21 percent, more owners anticipate worsening conditions than improving conditions.

The share of owners planning to increase capital outlays over the next three to six months remained unchanged at 25 percent. Meanwhile, 10 percent of owners said now is a good time to expand, up two points.

The proportion of owners who expect to increase inventories fell two points to a net negative 1 percent. The share of owners who deem existing inventories too low rose two points to a net negative 2 percent.

A net 11 percent of owners plan to increase staffing, down four points from December. Still, 29 percent of owners reported hard-to-fill job openings, up point.

The share of owners who expect higher sales fell four points to a net 3 percent.

The portion of small business owners reporting higher earnings slipped a point. At a neg negative 18 percent, more owners reported profits were lower quarter to quarter than higher.

Asked to identify their single most pressing business problem, 21 percent of owners cited taxes, followed by government regulations and red tape at 18 percent, quality of labor at 15 percent and poor sales at 12 percent.