A monthly measure of optimism among small business owners has declined on less upbeat expectations for an improving economy, staffing and sales.
“Business operations are still very strong, but small business owners’ expectations about the future are shaky,” said Juanita Duggan, president and chief executive officer of the National Federation of Independent Business. “One thing small businesses make clear to us is their dislike for uncertainty. And while they are continuing to create jobs and increase compensation at a frenetic pace, the political climate is affecting how they view the future.”
Bill Dunkelberg, chief economist of the NFIB, said Democrats and Republicans can’t agree on even basic policies, and that’s affecting small businesses. “Although January’s index showed some positive developments among current business conditions, the return to divided government in Washington created an inability to agree on basic policy measures. This produced the longest partial government shutdown in history, elevating the level of uncertainty, which is damaging to economic activity.”
The NFIB reported its Small Business Optimism Index fell 3.2 points to 101.2 in January. The index remains above its historical average of 98, but has dropped 7.6 points from the record high posted in August.
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 January, seven of 10 components of the index retreated.
The proportion of small business owners responding to the survey upon which the January index was based who said they expect the economy to improve fell 10 points from December to a net 6 percent.
A net 26 percent of owners reported plans for capital outlays in coming months, up a point. But the share of owners who said they consider now a good time to expand fell four points to a net 20 percent.
The proportion of owners reporting plans to increase inventories dropped seven points to a net 1 percent. At a net negative 3 percent, more owners reported existing inventories too high than too low.
A net 18 percent of owners reported plans to increase staff, down five points.
However, a net 35 percent of owners reported hard-to-fill job openings, down four points. In addition, 23 percent of owners cited the difficulty of finding qualified employees as their single most important business problem, ahead of taxes, government regulations and financing.
Reports of higher worker compensation rose to a net 36 percent of all firms in January, the second-highest level in survey history. Wages increased 3.2 percent in the United States in 2018.
A net 16 percent of owners said they expect sales to increase, down seven points. At a net negative 5 percent, more owners reported lower earnings than higher earnings.