Small Business Optimism Index retreats

William Dunkelberg
William Dunkelberg

A monthly measure of optimism among small business owners has retreated on less upbeat expections for everything from improving conditions to sales to earnings.

The National Federation of Independent Business reported that its Small Business Optimism Index slipped 2.5 points to 97.9 in January. The decrease erased a 2.3-point increase in December that pushed the index to its highest level in more than eight years.

“November and December readings were very strong, possibly from post-election euphoria. January’s decline was mostly due to owners being less optimistic about business conditions,” said Bill Dunkelberg, chief economist for the NFIB.

Although they’re lower, most of latest readings for the index remain solid, Dunkelberg said. “Even though there is a decline in optimism, the small business sector is operating in a somewhat normal zone. The increase in the percentage of owners reporting hard-to-fill job openings is very good news.”

The NFIB bases the index on the results of monthly surveys of small business owners who belong to the adocacy group. For January, seven out of 10 components of the index decreased, while two components increased and one component remained unchanged.

The proportion of small business owners responding to the survey upon which the January index was based who expect the economy to improve over the next six months tumbled 12 points to a net 0 percent.

The share of owners who expect increased sales fell four points to a net 16 percent. Asked to identify their most pressing business problems, 13 percent of owners cited weak sales, up two points.

The proportion of owners who said they plan to make capital outlays over the next three to six months fell three points to a net 26 percent. A net 13 percent of owners said they consider now a good time to expand, also down three points.

The share of owners who plan to increase inventories dropped three points to a net 2 percent.

A net 14 percent of owners said they plan to increase staffing, down a point. A net 26 percent of owners reported hard-to-fill job openings, up a point.

Reports of positive earnings trends fell four points to a net negative 19 percent.