Entrepreneurs show doubt about economic outlook

According to a news release, the index declined 1.2 points to 96 in June, and has been below 100 for all of 2007.

“Small-business owners have seen little to encourage them about growth,” said NFIB Chief Economist William Dunkelberg in the release, “but there are few signs that the economy is ready to slip into an actual recession.”

Hiring plans among small firms decreased in June, but job openings are historically high and unemployment remains low. On a seasonally adjusted basis, job growth was flat compared to May, with about as many – 12 percent – firms increasing total employment as reducing it.

Also, 26 percent of companies surveyed reported unfilled job openings, up 2 percent from June. Of those, 13 percent said the availability of qualified labor was their No. 1 business problem, up from 12 percent in May.

In the next quarter, a seasonally adjusted net 12 percent of owners plan to create new jobs, and 54 percent reported hiring or trying to hire new workers.

The frequency of reported capital outlays over the past six months fell five points to 55 percent of all firms. Plans to make capital expenditures over the next few months fell a point to 28 percent, consistent with the views of owners about the prospects for more economic growth.

“Capital spending plans remained weak,” Dunkelberg said. “Small-business owners are plodding along. There is not enough spending to lift productivity significantly.”

Also in the survey:

• 13 percent of respondents said the current period is a good time to expand facilities;

• a net-negative 5 percent expect business conditions to improve in the next six months, down two points;

• 27 percent of owners reported higher sales, but 28 percent reported lower sales. Business owners, on balance, plan to reduce inventory stocks.

• a net 1 percent expect higher real sales, down five points from May.

Overall, expectations for economic growth are soft, according to the survey, with gross domestic product Growth likely to be close to 2 percent.

Capital markets remain friendly, according to survey data. Regular borrowing activity was reported by 35 percent of owners, down three points. The net percent of owners reporting loans harder to get in recent months fell one point to a net 5 percent, typical of recent readings.

Only 3 percent of owners cited the cost and availability of credit as their No. 1 business problem, far from the record 37 percent reached in 1982. Thirty-six percent reported having all their credit needs met compared to 4 percent who reported problems obtaining desired financing.

“There is no real evidence that credit standards are being tightened, and credit remains as available as it has been for years,” Dunkelberg said. “It’s just more expensive.”