Small business optimism index edges up

A monthly index tracking optimism among small business owners has increased for a second consecutive month, but not yet  enough to reflect a significant change in outlook.

The National Federation of Independent Business reported its Small Business Optimism Index rose 1.3 points in October to 90.2. Even with gains over the past two months, the latest reading remains below the year-to-date average of 91.1 and only slightly better than the average of 89.1 since January 2009.

The index is based on the results of monthly surveys of a random sample of 2,077 members of the NFIB, a small business advocacy group based in Washington, D.C.

“Consumer sentiment remains at very low levels and is reflected in the 26 percent of small business owners who cite poor sales as their biggest problem,” said Bill Dunkelberg, chief economist of the NFIB.

“There is no exuberance in spending, as consumers make do rather than spend their increased savings in upgrades or new purchases. It’s that extra spending that would provide small business owners a reason to hire and order more inventory, the best stimulus we could have. But confidence is the key and right now there isn’t much.”

The proportion of small business owners responding to the October survey who expect improving conditions in six months rose six points, but remains at a net negative 16 percent and 26 points below the reading for January.

The share of owners reporting capital outlays over the past six months rose two points to 52 percent. The proportion of owners who plan outlays over the next three months advanced a point to 21 percent. Only 7 percent of owners said now is a good time to expand, up a point.

A net 14 percent of owners reported unfilled job openings, unchanged from last month. A net 3 percent of owners expect to increase staffing over the next three months, down a point.

The share of owners who reported their inventories as too low rose a point, but remains at net 0 percent. The proportion of owners who plan to increase inventories rose two points, but also remains at a net 0 percent.

The share of owners reporting higher sales over the past three months fell two points to a net negative 12 percent. The proportion of owners who expect higher sales rose two points, but only to a net negative 4 percent. The October reading remains 17 points below the January reading.

A net negative 26 percent of owners reporting positive earning trends, up a point.

While 26 percent of owners cited poor sales as their top business problem, only 4 percent cited financing and only 9 percent reported their credit needs weren’t fully met.