Index: Uncertainty curbs small business optimism

William Dunkelberg
William Dunkelberg

A monthly measure of optimism among small business owners has slipped as uncertainty has dampened expectations for improving economic conditions, earnings and sales.

“Uncertainty seems to be the major enemy of economic progress, and the political climate is a major contributor to the high levels of uncertainty that we’ve seen,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business. “The current economic environment is not a good one for strong or sustained growth.”

The NFIB reported that its Small Business Optimism Index slipped two-tenths of a point to 94.4 in August, remaining well below the historical average of 98.

Juanita Duggan, president and chief executive officer of the NFIB, said a record-high 38 percent of owners cited the political climate as a reason not to expand. “Based on this data, small business owners now blame the political climate for the declining economic conditions. We haven’t seen numbers like these before, and it’s alarming.”

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners. For August, five of 10 components of the index advanced, while four retreated and one remained unchanged.

The portion of small business owners responding to the survey upon which the August index was based who expect the economy to improve fell seven points. At a net negative 12 percent, more owners anticipated worsening than improving conditions.

Still, the share of owners reporting plans for capital outlays over the next three months rose three points to a net 28 percent. A net 9 percent of owners indicated they consider now a good time to expand, up a point.

A net 9 percent of owners reported plans to increase staffing, down three points. Meanwhile, though, a net 30 percent of owners reported hard-to-fill job openings, up four points.

The share of owners planning to increase inventories rose a point to a net 1 percent. The portion of owners who said they consider current inventories too low rose two points to a net negative 2 percent.

The share of owners who said they expect higher sales fell two points to a net negative 1 percent. The proportion of owners reporting higher earnings fell two points to a net negative 23 percent.

Asked to identify their most pressing business problems, owners most frequently cited taxes, government regulations and difficulty finding qualified workers.