Indexes: Uncertainty affects small business outlook

William Dunkelberg
William Dunkelberg
Juanita Duggan
Juanita Duggan

A monthly measure of optimism among small business owners has increased, but continues to reflect uncertainty that in turn affects plans for capital outlays and hiring.

A separate measure of just uncertainty climbed to a record high.

“Small business owners need predictability. What we’re seeing in our data is that the political climate creates the opposite,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business.

Juanita Duggan, president and chief executive of the NFIB, said small business owners are struggling with taxes, regulations and rising health care costs. “In addition to all of that, small business owners cannot reasonably anticipate what actions government will take in the near future that will create even more burdens.”

The NFIB reported that its Small Business Optimism Index rose eight-tenths of a point in October, but at 94.9 remains below the historical average of 98. The Uncertainty Index rose two points to a record-high 88 in October. The NFIB bases both indexes on the results of monthly surveys of members of the small business advocacy group, most of them small business owners.

For October, five of 10 components of the optimism index advanced, while three declined and two remained unchanged.

The portion of small business owners who responded to the survey upon which the October index was based who expect the economy to improve fell seven points. At a net negative 7 percent, more owners anticipate worsening rather than improving conditions.

A net 27 percent of owners reported plans for capital outlays over the next three months, unchanged from September. However, a net 9 percent of owners said they consider now a good time to expand, up two points.

A net 10 percent of owners reported plans to increase staffing, also unchanged from September. Meanwhile, a net 28 percent of owners reported hard-to-fill job openings, up four points.

The share of owners who said they expect to increase inventories jumped nine points to a net 2 percent. The portion of those who said they consider current inventories too low rose three points, but remained below zero at a net negative 4 percent.

A net 1 percent of owners said they expect higher sales, up three points. But the share of owners who reported higher earnings fell a point to a net negative 21 percent.

Asked about their most pressing business problems, equal portions of owners cited taxes and regulations and red tape. The quality of labor also was cited as a problem.