Index shows lack of small-business optimism

Despite some signs of hope in the U.S economy, the latest data from the National Federation of Independent Business shows that optimism has stalled among the nation’s small-business owners.

NFIB announced Jan. 12 that its Index of Small Business Optimism fell 0.3 points in December to 88, marking the 15th consecutive month the index has been below 90. The lowest reading for the index, at 80.1, was in 1980, according to a news release.

“2009 was a very difficult year for small business,” said NFIB Chief Economist William Dunkelberg in the release. “Continued weak sales and threatening domestic policies from Washington, have left small-business owners with little to be optimistic about in the coming year.”

While the index showed that 10 percent of the owners polled increased their employment, those gains were not enough to offset the 22 percent that reported staff cuts. In the first quarter, 15 percent to reduce unemployment, while 8 percent anticipate new-job creation.

“While the trend for increased employment is going in the right direction, there is no indication that job growth will be strong enough to dramatically reduce the unemployment rate,” Dunkelberg said.

According to the index, 10 percent of the owners polled said they raised average selling price, but 33 percent said reported price reductions, yielding a net-negative 22 percent of owners who cut prices in December. Looking forward, a net 3 percent of owners said they plan to raise prices in 2010.

“The weak economy continued to put downward pressure on prices,” Dunkleberg said.
Positive profit trends were unchanged in the index at a net negative 43 percentage points, with companies citing weaker sales, rising labor, materials and health insurance costs and lower sales prices for the anticipated earnings drops.

Access to capital also continued to be a challenge for U.S. small businesses, with net 15 percent of regular borrowers – those accessing capital markets at least once a quarter – reporting more difficulty in getting loans.

“Still that is not nearly as severe as the financial distress reported in the pre-1983 period,” Dunkleberg said. “Twenty-four months of recession have sapped the financial strength of many small firms.”[[In-content Ad]]