Optimism index remains high, but worries mount

Juanita Duggan
Juanita Duggan

An index tracking optimism among small business owners remains at an historically high level, but that could change depending on what happens in Washington, D.C.

The National Federation of Independent Business reported its Index of Small Business Optimism slipped two-tenths of a point in April. But at 104.5, the index remained at an historically high level for a sixth consecutive month, a streak not seen since 1983.

However, a component of the index tracking expectations for improving economic conditions fell eight points.
In a separate component tracking the top challenges facing small businesses, taxes rose to the top of the list.

“Congress and the White House must understand that small business owners are paying close attention, and they are making decisions that effect the economy based on how Washington performs,” said Juanita Duggan, president and chief executive officer of the NFIB. “The drop in expected business conditions should be a warning to Washington that health care reform, regulatory reform and tax reforms have implications far bigger than politics.”

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 April, five of 10 components of the index advanced, while three retreated and two remained unchanged.

A net 38 percent of small business owners responding to the survey upon which the April index was based expect the economy to improve, down eight points.

A net 27 percent of owners reported plans to increase capital outlays over the next three months, down two points. Still, a net
24 percent of owners said they consider now a good time to expand,  up two points.

A net 16 percent of owners reported plans to increase staffing, unchanged from March. Meanwhile, a net 33 percent of owners reported hard-to-fill job openings, up three points.

A net 3 percent of owners reported plans to increase inventories, up a point. But at a net negative 3 percent, more owners said current inventories were too high than too low.

A net 20 percent of owners said they expect higher sales, up two points. At a net negative 9 percent, more owners reported lower earnings than higher earnings.

In citing their most pressing business problems, 21 percent of owners reported taxes.

“That should be a clear indication for Congress and the White House to finish health care reform and move quickly to tax reform,” Duggan said.