Small business optimism mired at recessionary level

A monthly measure of confidence among small business owners edged up for a second straight month, but continues to reflect conditions typical of an economy mired in recession.

“The downturn may be officially over, but small business owners have, for the most part, seen no evidence of it,” said William Dunkelberg, chief economist for the National Federation of Independent Business (NFIB).

The small business advocacy group reported that its Index of Small Business Optimism rose two-tenths of a point to 89 in September.

The index, based on the results of monthly surveys of small business owners across the country, has advanced nearly a point over the past two months. However, the index has remained below 93 for 32 straight months and below 90 for 26 of those months.

Dunkelberg said business owners remain uncertain about the economy as well as the fate of Bush-era tax cuts set to expire at the end of the year. Congress recessed before taking action on the cuts. “Members of Congress fled with no action on important issues such as extending current tax rates, leaving the cloud of uncertainty larger and darker,” Dunkelberg said. “Owners won’t make spending commitments when sales prospects remain weak and decisions such as tax rates and labor costs remain so uncertain.”

The proportion of owners responding to the September survey who expect business conditions to improve over the next six months rose five points, but remains at a net negative 3 percent. That means more owners believe the economy will weaken than improve.

The share of owners who plan to increase staffing over the next three months fell four points to a seasonally adjusted net negative 3 percent. Meanwhile, 11 percent of owners reported unfilled job openings, unchanged from August.

The proportion of owners who anticipate making capital expenditures over the next few months rose three points to 19 percent. A net 6 percent of owners said they consider now a good time to expand, up two points.

The share of owners reporting higher sales over the past three months slipped a point to a net negative 17 percent. A net negative 3 percent of owners expect higher sales, down three points.

Small business owners continue to cut inventories as weak sales give them little reason to order new stock. A net negative 14 percent of owners reported inventory gains, up a point. The reading for inventories has remained negative for 40 straight months.

The weak economy continues to press down prices with a net negative 11 percent of owners reporting raising prices, a three-point decline. More owners have reported cutting average selling prices than raising prices for 22 consecutive months.

A net negative 33 percent of owners reported positive profit trends, down three points.