Uncertainty dampens small business outlook

William Dunkelberg

A measure of optimism among small business owners has decreased even as uncertainty over the COVID-19 pandemic and related restrictions has increased.

The National Federation of Independent Business reported its Small Business Optimism Index fell 2.6 points to 101.4 in November. The index remains above the nearly 50-year average reading of 98, however.

“Small business owners are still facing major uncertainties, including the COVID-19 crisis and the upcoming Georgia runoff election, which is shaping how they’re viewing future business conditions,” said Bill Dunkelberg chief economist of the NFIB. “The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses.”

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 November, six of 10 components of the index retreated and four advanced.

The proportion of those responding to the survey upon which the November was based who expect the economy to improve over the next six months dropped 19 points to a net 8 percent.

The share of those reporting higher earnings fell four points. At a net negative 7 percent, more respondents reported lower earnings than higher earnings.

Among those reporting weaker profits, 55 percent blamed weak sales and 8 percent cited higher material costs. Among those reporting stronger profits, 73 percent credited increased sales volume and 8 percent cited higher prices.

A net 10 percent said they expect higher sales, down a point.

A net 26 percent reported plans to make capital outlays, down a point. A net 12 percent said they consider now a good time to expand, also down a point.

A net 5 percent reported plans to increase inventories, down seven points from what was a record-high 12 percent in October. A net 5 percent said current inventories were too low, up a point.

A net 21 percent of those responding to the survey reported plans to increase staffing, up three points.

A net 34 percent reported hard-to-fill job openings, up a point.  At the same time, 24 percent cited finding qualified labor as their single most problem. That ranked ahead of taxes, regulations and poor sales. A net 20 percent reported plans to increase compensation in coming months.