WASHINGTON (MNI) – The following is the text of the National
Federation of Independent Business’ monthly Small Business Optimism
index published Tuesday:

After six months of gains, the Small-Business Optimism Index fell
by almost 2 points in March, settling at 92.5. After a promising start
to the year, nine of ten index components dropped last month, most
notably hiring plans and expected real sales growth each taking a
significant dive, in spite of owners reporting the largest increase in
new jobs per firm in a year.

“March came in like a lion, with Main Street seeing significant job
growth in March-but it appears to have gone out like a lamb, and with no
cheer in the forward-looking labor market indicators. What could have
been a trend in job growth is more likely a blip,” said NFIB Chief
Economist Bill Dunkelberg. “And what looked like the start of a recovery
in profits fizzled out. The mood of owners is subdued-they just can’t
seem to shake off the uncertainties out there, and confidence that the
management team in Washington can deal with the effectively is flagging.
What we saw in March is painfully familiar — this was the same pattern
of growth followed by months of decline from 2011. History appears to be
repeating itself-and not in a good way.”

The March survey results ended what appeared to be steady, albeit
slow, trend of improvement for the small-business sector of the economy.
The percent of owners reporting inflation as their No. 1 business
problem is now at nine percent, an increase from six percent in January.
Reports of increases in average selling prices are rising and net 21
percent of the owners plan to raise their selling prices in the coming
months.

Optimism Components Net % Change

PLAN TO INCREASE EMPLOYMENT 0 -4

PLAN TO INCREASE CAP. OUTLAYS* 22 -1

PLAN TO INCREASE INVENTORIES 0 -2

EXPECT ECONOMY TO IMPROVE -8 -2

EXPECT HIGHER REAL SALES 8 -4

CURRENT INVENTORY
SATISFACTION 3 +1

CURRENT JOB OPENINGS* 15 -2

EXPECTED CREDIT CONDITIONS -11 -1

NOW A GOOD TIME TO EXPAND* 7 -1

EARNINGS TRENDS -23 -4

* 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.

Some other highlights of March’s Optimism Index include:

– Job Creation: Job creation in March was the bright spot in
this month’s Index; the net change in employment per firm seasonally
adjusted was 0.22, far above January’s “0” reading. Seasonally adjusted,
10 percent of the owners added an average of 3.1 workers per firm over
the past few months, and 13 percent reduced employment an average of 2.1
workers per firm. The remaining 77 percent of owners made no net change
in employment. Forty-four (44) percent of owners hired or tried to hire
in the last three months and 32 percent reported few or no qualified
applicants for positions. The ability to find qualified applicants for
available jobs continues to be a problem for many small-business owners.
The percent of owners reporting hard to fill job openings fell 2 points
to 15 percent, the second monthly decline since reaching 18 percent in
January. The net percent of owners planning to create new jobs is in its
fourth month of decline. March’s net “0” reading for planned job
creation was 4 points lower than February and 7 points lower than
November 2011. The reports of actual hiring over the past few months are
the best since February 2011, making March the best job creation month
in a year. However, the decline in the percent of owners with a
hard-to-fill opening and in the percent of owners planning to increase
the number of workers employed indicate growing weakness in the job
market and portend a rising unemployment rate.

– Sales and Earnings: Owners reporting higher nominal sales over
the past three months (seasonally adjusted) gained a surprising 8
points, rising to a net 1 percent, and providing the best reading since
December 2007. However, even with the improvements in retail sales in
recent months, 22 percent of owners surveyed still reported “weak sales”
as their top business problem. Seasonally unadjusted, 23 percent of all
owners reported higher sales (last three months compared to prior three
months, up 3 points), while 31 percent reported lower sales (down 1
point). Expectations for higher real sales dropped, falling 4 points to
a net 8 percent of all owners (seasonally adjusted). Not seasonally
adjusted, 42 percent expect improvement over the next 3 months (up 1
point) and 16 percent expect declines (down 5 points). A lack of sales
remains a problem for owners with 22 percent reporting “poor sales” as
their top business problem.

– Capital Expenditures: The frequency of reported capital
outlays over the past six months fell 5 points to 52 percent, a reversal
of the gains made during the two months prior. Of those making
expenditures, 36 percent reported spending on new equipment (down 4
points), 20 percent acquired vehicles (down 3 points), and 13 percent
improved or expanded facilities (unchanged). Four percent acquired new
buildings or land for expansion (down 1 point) and 11 percent spent
money for new fixtures and furniture (down 1 point). Plans to make
capital outlays in the next three to six months fell one point, with 22
percent of owners indicating they are likely to make the investment.
Seven percent of owners characterized the current period as a good time
to expand facilities (seasonally adjusted), and the net percent of
owners expecting better business conditions in six months settled at a
negative 8 percent. Not seasonally adjusted, 21 percent expect
deterioration (up 4 points), and 23 percent expect improvement (up 2
points). A net 8 percent of all owners expect improved real sales
volumes, down 4 points from February.

– Credit Access: Financing continues to be low on the list of
concerns for small-business owners. Only four percent cited financing as
their top business problem, compared to 20 percent citing taxes and 19
percent citing unreasonable regulation. Ninety-two (92) percent reported
that all their credit needs were met or that they were not interested in
borrowing. Twenty-seven (27) percent reported all credit needs met,
compared to eight percent who reported that not all of their credit
needs were satisfied. Just over half of owners said they did not want a
loan, and 13 percent did not respond to the question. Thirty-one (31)
percent of all owners reported borrowing on a regular basis. A net 11
percent reported loans are “harder to get” compared to their last
attempt (asked of regular borrowers only), also down 3 points. The net
percent of owners expecting credit conditions to ease in the coming
months was a seasonally adjusted negative 11 percent (more owners expect
that it will be “harder” to arrange financing than easier), 1 point
worse than February.

** MNI Washington Bureau: 202-371-2121 **

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