Small-Business Confidence heading in Wrong Direction

After three months of sustained growth, the March NFIB Index of Small Business Optimism ended its slow climb, declining 1.3 points and landing at 89.5. In the 44 months of economic expansion since the beginning of the recovery in July 2009, the Index has averaged 90.7, putting the March reading below the mean for this period. Of the ten Index components, two increased, two were unchanged and six declined. Among the greatest declines were labor market indicators, inventory investment plans and sales expectations. State-specific data is not available, but Ben Homeyer, state director of NFIB/South Carolina, said small-business optimism here has lost momentum. “The fact that small businesses are not hiring, are not borrowing and are not expanding tells us that what’s really hurting the economy right now is uncertainty about where things are headed,” he said. In the March report, over three-quarters of business owners reported that they expect business conditions in six months to remain the same as they are now or worse. Aggregated, there are no plans to create new jobs in the coming months, although some parts of the U.S. will experience job growth and some sectors will create new jobs. A near record low percentage of small-business owners claim that credit is their top business problem (3$); the greatest business problem for 23% of owners is taxes and regulations and red tape for 21% of owners. Today’s report is based on the responses of 759 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of March. Download the complete study at http://www.nfib.com/sbetindex.