WASHINGTON (MNI) – The following is the text of the National
Federal of Independent Business summary of its Small Business Optimism
index, published Tuesday:

The National Federation of Independent Business Index of Small
Business Optimism gained 3.8 points in April, rising to 90.6 and ending
seven straight quarters of under 90 readings(1). The persistence of
Index readings below 90 is unprecedented in survey history. Nine of the
10 Index components rose, particularly the outlook for general business
conditions and sales, and one was unchanged. Still, job measures barely
moved and capital expenditure plans were flat.

“The gains are a step in the right direction, but they are not
enough to signal a solid recovery is in place,” said William Dunkelberg,
NFIB chief economist. “Owners are feeling a little better about things,
but not enough to turn them into concrete action.”

Optimism Components Net % Change

PLAN TO INCREASE EMPLOYMENT -1% 1
PLAN TO INCREASE CAP. OUTLAYS* 19% 0
PLAN TO INCREASE INVENTORIES -2% 5
EXPECT ECONOMY TO IMPROVE 0% 8
EXPECT HIGHER REAL SALES 6% 9
CURRENT INVENTORY SATISFACTION 1% 2
CURRENT JOB OPENINGS* 11% 2
EXPECTED CREDIT CONDITIONS -15% 1
NOW A GOOD TIME TO EXPAND* 4% 2
EARNINGS TRENDS -31% 12

* 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.

Employment

Seasonally adjusted, the average employment per firm was negative
0.18 in April. Since July 2008, employment per firm has fallen steadily
each quarter, logging the largest reductions in the surveys 35-year
history.

Eleven percent (seasonally adjusted) reported unfilled job
openings, up two points but historically still very weak. Over the next
three months, 7 percent plan to reduce employment (unchanged) and 14
percent plan to create new jobs (down 1 point), yielding a seasonally
adjusted net-negative 1 percent of owners planning to create new jobs.
That result is a point better than the March reading, but still very
weak.

Capital Spending and Outlook

The frequency of reported capital outlays over the past six months
rose one point to 46 percent of all firms in April, two points above the
35-year record low reached most recently in December 2009. Of those
making expenditures, 32 percent reported spending on new equipment (up
two points), 15 percent acquired vehicles (down one point), and 10
percent improved or expanded facilities (up two points). Four percent
acquired new buildings or land for expansion (unchanged), and 10 percent
spent money for new fixtures and furniture (up one point).

Plans to make capital expenditures over the next few months were
unchanged at 19 percent, 3 points above the 35-year record low.

Four percent characterized the current period as a good time to
expand facilities, up 2 points from March. A net 0 percent expect
business conditions to improve over the next six months, up 8 points
from March.

Sales and Inventories

The net percent of all owners (seasonally adjusted) reporting
higher nominal sales in the past three months improved 10 points to a
net-negative 15 percent, still negative, but a huge improvement. It is
the best reading since September 2008, just before consumers stopped
spending in the fourth quarter of 2008. The net percent of owners
expecting real sales gains gained nine points, rising to 6 percent of
all owners (seasonally adjusted).

A net-negative 18 percent of all owners reported gains in
inventories (more firms cut stocks than added to them, seasonally
adjusted), 10 points better than December’s record liquidation reading,
but unchanged from February and March. This is the 25th negative
double-digit month in a row, and the 35th negative month in a row. Plans
to add to inventories improved five points to a negative 2 percent of
all firms (seasonally adjusted) still more owners planning to reduce
stocks than planning new orders (and not borrowing money to support
inventory investment).

Inflation

Fifteen percent of the owners (up four points) reported raising
average selling prices, but 24 percent reported average price reductions
(down five points). Seasonally adjusted, the net percent of owners
raising prices was a negative 11 percent, a nine point increase in the
net percent raising prices. April is the 17th consecutive month in which
more owners reported cutting average selling prices that raising them.

“Certainly in the near term, inflation is not a risk,” said
Dunkelberg.

Earnings

Reports of positive profits improved by 12 points in April, with a
net negative 31 percent of small business owners reporting positive
profits. Not seasonally adjusted, 14 percent reported profits higher (up
5 points), but 51 percent reported profits falling (down 7 points). The
April figures represent significant improvements, but it is hard to
ignore that profits for many small firms remain negative.

Of the owners reporting higher earnings, 57 percent cited stronger
sales as the primary cause and 7 percent each credited lower labor
costs, material costs and higher selling prices. For those reporting
lower earnings compared to the previous three months, 57 percent cited
weaker sales, 4 percent blamed rising labor costs, 6 percent higher
materials costs, 2 percent higher insurance costs, and 6 percent blamed
lower selling prices. Six percent blamed taxes and regulatory costs.

Credit

Regular NFIB borrowers, 31 percent (record low) accessing capital
markets at least once a quarter, continued to report difficulties in
arranging credit. A net 14 percent reported loans harder to get than in
their last attempt, down 1 point from March. Overall, 91 percent of the
owners reported all their credit needs met or they did not want to
borrow.

Only 4 percent of the owners reported finance as their top business
problem (down 1 point). Pre-1983, as many as 37 percent cited financing
and interest rates as their top problem.

“What small businesses need are customers, giving them a reason to
hire and make capital expenditures and borrow to support those
activities,” said Dunkelberg. “Bottom line, the recovery will be sub-par
in comparison to the recoveries we experienced following past severe
recessions such as 1980-82.”

** Market News International Washington Bureau: 202-371-2121 **

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