Retreat in small business optimism extends to six months

A measure of optimism among small business owners has dropped for a sixth straight month, a decline one economist blamed on growing uncertainty about the future.

The National Federation of Independent Business reported that its Small Business Optimism Index retreated 1.8 points in August to 88.1. The index is based on the results of monthly surveys of small business owners who belong to the NFIB.

Bill Dunkelberg, chief economist of the NFIB, blamed the latest drop in part to the debate over raising the national debt ceiling. “The tumultuous debate over the nation’s debt ceiling and a dramatic 11th hour ‘rescue’ by lawmakers did nothing to improve the outlook of job-makers.”

Moreover, small business owners remain uncertain, Dunkelberg said. “When people are uncertain about the future or fear it, they don’t spend or invest, and they chase after protection — and protection is unlikely to come from the government.”

The proportion of small business owners responding to the August survey who expect improving conditions in six months dropped 11 points to a negative 26 percent.

The share of owners who expect to make capital outlays in the next three to six months rose a point — but at just 21 percent the reading reflects more recession than recovery. Only 5 percent of owners said they consider now a good time to expand.

Sales remain the biggest problem for small businesses, Dunkelberg said, with 25 percent of owners citing poor sales as their top challenge. The share of owners who expect higher sales in coming months fell 10 points to a net negative 12 percent.

There was some good news in the survey results related to hiring. Fifteen percent of owners reported unfilled job positions, up three points. At the same time, a net 5 percent of owners said they plan to increase staffing over the next three months, up three points.