Small business optimism index rising, but doesn’t reflect significant change Small business optimism index rising, but doesn’t reflect significant change

A monthly measure of optimism among small business owners continues to increase. But with levels higher a year ago, a significantly more upbeat outlook has yet to emerge. The National Federation of Independent Business reported that its Small Business Optimism Index edged up a tenth of a point in January to 93.9.

But even with gains in each of the last five months, the index remains below the reading of 94.1 posted a year ago.

“Nothing happened last month that would significantly improve the small business outlook,” said Bill Dunkelberg, chief economist for the NFIB. Congress has failed to pass a budget for over 1,000 days and U.S. debt exceeds gross domestic product. Dunkelberg said. “This does not make for a comforting future, a fact reflected by low consumer and small business optimism.”

A look back over the past year of index reading suggests that for small business owners, 2011 was a flat year, Dunkelberg said.  While the index has increased, Dunkelberg said he expects slow economic growth in 2012.

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy organization.

The proportion of small business owners responding to the surveys upon which the January index was based who expect business conditions to improve over the next six months rose five points. The reading remains at a net negative 3 percent, however, and 13 points below last year.

A seasonally adjusted net 5 percent of small business owners said they plan to increase employment, down a point. Still, 18 percent of owners reported unfilled job openings, up three points and an indication labor markets are tightening in some areas.

Meanwhile, 24 percent of owners reported plans to make capital outlays over the next three months, unchanged from December. While the reading has climbed to its highest point in years, it remains 10 points below that normally seen in an expanding economy. The share of owners who said they consider now a good time to expand dropped a point to 9 percent.

A net 10 percent of owners expect sales volume to increase, up a point.

Still, 22 percent of owners cited poor sales as their top business problem.

The proportion of owners reporting inventory growth rose three points in January, but at a net negative 7 percent represents the 56th consecutive month in which reported inventory reductions outnumbered increases.