WASHINGTON (MNI) – The following is the text of the National
Federation of Independent Business’ monthly Small Business Optimism
index published Tuesday:
Confidence in the economy among small-business owners tumbled in
August, as NFIB’s monthly Small-Business Optimism Index dropped a
whopping 1.8 points, settling at a disturbingly low 88.1. The Index has
now been in decline for a full six months. Unlike previous months,
August’s decline comes in the immediate aftermath of the debt ceiling
debate, suggesting a small business “vote of no confidence” in the
agreement reached in Washington.
“The results of this month’s survey are very telling,” said NFIB
Chief Economist Bill Dunkelberg. “The tumultuous debate over the
nation’s debt ceiling and a dramatic 11th hour ‘rescue’ by lawmakers did
nothing to improve the outlook of job-makers. In fact, hope for
improvement in the economy faded even further throughout the month,
proving that short-term fixes will not help. Private sector decision
makers think longer term and they don’t like what they see. There is
little clarity or certainty. When people are uncertain about the future
or fear it, they don’t spend or invest, and they chase after
protection-and protection is unlikely to come from the government.”
Optimism Components Net % Change
PLAN TO INCREASE EMPLOYMENT 5 +3
PLAN TO INCREASE CAP. OUTLAYS* 21 +1
PLAN TO INCREASE INVENTORIES -5 -2
EXPECT ECONOMY TO IMPROVE 15 +3
EXPECT HIGHER REAL SALES 1 +1
CURRENT INVENTORY SATISFACTION 5 -1
CURRENT JOB OPENINGS* -26 -11
EXPECTED CREDIT CONDITIONS -12 -10
NOW A GOOD TIME TO EXPAND* -13 -2
EARNINGS TRENDS -26 -2
* Note: These components are measured as actual percentages of all
respondents and are not net percentages. A net percentage is the percent
positive minus percent negative.
The results of this month’s survey provide a window into how the
debt ceiling debate impacted the outlook of the small-business
community. The July survey interviews were taken as the issue was
debated; and the Administration’s debt ceiling deal was announced just
as NFIB mailed its first wave of interviews for the August survey. The
resulting Index was one of the largest declines in owner optimism posted
in the last six months. Expectations for real sales gains and improved
business conditions account for most of the decline in the Index. The
four components in positive territory eased some of that loss, although
not by much, landing the Index at a 1.8 point loss.
Some other highlights of August’s Optimism Index include:
– Sales remain the largest problem for small firms-a full quarter
identifying “poor sales” as their top business problem. The net percent
of all owners (seasonally adjusted) reporting higher nominal sales over
the past three months lost 1 percentage point, falling to a net negative
9 percent, with more firms with sales trending down than up. Not
seasonally-adjusted, 27 percent of all owners reported higher sales
(last three months compared to prior three months), down 2 points from
the prior month, while 28 percent reported lower sales (unchanged).
Expectations for future sales are also in decline, with the net percent
of owners expecting higher real sales falling 10 points in August, to a
net negative 12 percent of all owners (seasonally adjusted), 25 points
below January’s reading. Not seasonally adjusted, 21 percent expect
improvement over the next 3 months (down 6 points) and 34 percent expect
declines (up 7 points). Owners appear to have lost confidence in the
economy and the government’s ability to assist the recovery.
– The net percent of owners expecting better business conditions in
six months was a negative 26 percent, down 11 points from July, and 36
percentage points lower than January. A negative 12 percent of all
owners expect improved real sales volumes, 25 points worse than January.
Only five percent characterized the current period as a good time to
expand facilities (seasonally adjusted), down 1 point and 3 points lower
than January. Of those reporting higher profits, 45 percent credited
higher sales and 5 percent each credited lower materials cost and higher
selling prices. Of those reporting negative sales trends, 45 percent
blamed faltering sales, 5 percent higher labor costs, 15 percent higher
materials costs, 3 percent insurance costs, 8 percent lower selling
prices and 10 percent higher taxes and regulatory costs.
– The frequency of reported capital outlays over the past six
months rose 2 points to 52 percent of all firms in August, the first
improvement in many months. Of those making expenditures, 36 percent
reported spending on new equipment (unchanged), 20 percent acquired
vehicles (up 3 points), and 13 percent improved or expanded facilities
(up 1 point). Five percent acquired new buildings or land for expansion
(unchanged) and 10 percent spent money for new fixtures and furniture
(unchanged). The percent of owners planning capital outlays in the next
three to six months rose 1 point to 21 percent, a recession level
reading that has typified the recovery to date.
– Over the next three months, 11 percent plan to increase
employment (up 1 point), and 12 percent plan to reduce their workforce
(up 1 point), yielding a seasonally adjusted 5 percent of owners
planning to create new jobs, a 3 point gain over July. Job creation saw
minimal improvement from the previous month. Owners reported reducing
employment an average of 0.08 workers per firm over the past few months.
This was an improvement from June’s -0.23 workers per firm and July’s
-0.15, but still a poor showing. Fifteen percent (seasonally adjusted)
reported unfilled job openings, up 3 points, suggesting that the
unemployment rate could ease a fraction or remain unchanged.
** Market News International Washington Bureau: 202-371-2121 **
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