Small business confidence index slips

William Dunkelberg
William Dunkelberg

A monthly measure of optimism among small business owners has declined on less upbeat expectations for capital outlays and hiring.

The National Federation of Independent Business reported that its Small Business Optimism Index retreated eight-tenths of a point in September. At 95.3, the index remains nearly five points below its prerecession average of 100.

“Small businesses just can’t seem to get out of second gear,” said Bill Dunkelberg, chief economist for the NFIB. “In order for the index to get back to average, responses to the 10 index component questions would have to improve 50 percentage points cumulatively. That’s a lot of positive responses to make up to get back to average, must less reach a level that means a solid recovery.”

“Overall, small business owners are still stuck in a rut that has been difficult to escape,” Dunkelberg added.

The NFIB bases the index on the results of monthly surveys of small business owners that belong to the group.

For September, six of 10 components of the index declined.

The proportion of small business owners responding to the survey upon which the September index was based who expect the economy to improve edged up a point. But at a net negative 2 percent, there still were more pessimistic than optimistic responses.

The share of owners who said they plan to make capital outlays dropped five points to a net 22 percent. At the same time, though, the share of those who said they consider now a good time to expand rose four points to a net 13 percent, the highest reading since December 2007.

The proportion of owners who plan to increase inventories edged up a point to a net 2 percent.

The share of owners who said they plan to increase staffing slipped a point to a net 9 percent, a leading indicator of what could be weaker job growth ahead. A net 21 percent of owners still reported hard-to-fill job openings, but that’s down five points.

The proportion of owners who expect increased sales fell a point to a net 5 percent. Meanwhile, 14 percent of owners cited poor sales as their most pressing business problem, one of the lowest readings since December 2007, but up a point from August.

Reports of positive earnings trends fell two points to a net negative 19 percent as weak sales and rising labor costs hamper profits.