Optimism index reflects “ho-hum outcome”

William Dunkelberg
William Dunkelberg

A monthly measure of confidence among small business owners has dipped to its lowest level in two years on less upbeat expectations for everything from capital outlays and hiring to sales and earnings.

The National Federation of Independent Business reported that its Small Business Optimism Index fell a point to 92.9. The index remains well below its historical average of 98.

“A ho-hum outcome this month confirms that the small business sector is not performing with any strength,” said Bill Dunkelberg, chief economist for the NFIB. “Small business owners are still waiting for a good reason to invest in the future.”

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 February, six of 10 components of the index decreased and four were unchanged.

“Political uncertainty remains a major concern, and the president does not seem inclined to address the major concerns of small business owners,” Dunkelberg said. “Every month the Fed dithers on interest rate policy, giving the impression that the economy is weak. All this generates uncertainty, the enemy of spending and hiring behavior that would move the economy forward at a faster pace.”

The proportion of small business owners responding to the survey upon which the February index was based who expect the economy to improve held steady. But at a net negative 21 percent, more owners anticipate worsening than improving conditions.

The share of owners planning to increase capital outlays over the next three to six months dropped two points to 23 percent. Meanwhile, 8 percent of owners said now is a good time to expand, also down two points.

A net 10 percent of owners said they plan to increase staffing, down a point. Still, 28 percent of owners reported hard-to-fill job openings, down a point.

The proportion of owners who expect higher sales fell three points to a net 0 percent.

The  proportion of owners planning to increase inventories remained unchanged at a net negative 1 percent. The share of owners who consider current inventories too low held steady at a net negative 2 percent.

The share of owners reporting higher earnings also fell three points. At a net negative 21 percent, more owners reported profits were lower quarter to quarter than higher.

Asked to identify their most pressing business problems, owners cited taxes, followed by government regulations and red tape, finding qualified workers and weak sales.