Small Business Optimism Index retreats

William Dunkelberg

A measure of optimism among small business owners has declined on less upbeat expectations for the economy and sales in the midst of the coronavirus pandemic.

The National Federation of Independent Business reported its Small Business Optimism Index fell 1.8 points to 98.8 in July, just below the historic average for the nearly 50-year-old index.

“This summer has been challenging for many small business owners who are working hard to keep their doors open and remain in business,” said Bill Dunkelberg, chief economist of the NFIB. “Small business represents nearly half of the (gross domestic product), and this month we saw a dip in optimism. There is still plenty of work to be done to get business back to pre-crisis numbers.”

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 July, five of 10 components of the index retreated, four advanced and one remained unchanged.

A net 25 percent of those responding to the survey upon which the July index was bases expect the economy to improve over the next six months, down 14 points from June. The drop accounted for nearly three-fourths of the decrease in the overall index.

A net 5 percent of respondents said they expect higher sales, down eight points.

A net 26 percent reported plans for capital outlays, up four points. But the 11 percent who said they consider now a good time to expand was two points lower than a month ago.

A net 18 percent said they plan to increase staffing, up two points. A net 30 percent reported hard-to-fill job openings, down two points. At the same time, 21 percent cited finding qualified labor as their single most important problem — ahead of taxes, government regulations and poor sales.

A net 4 percent reported plans to increase inventories, down three points. A net 1 percent reported current inventories as too low, unchanged from June.

A larger proportion of those who responded to the latest NFIB survey reported higher earnings — up three points. But at a net negative 32 percent, the reading was only slightly higher than the low reported more than a decade ago. Most blamed weak sales.