Small-business optimism in U.S. on rise, but ‘shaky at best’

Small businesses nationwide reported improved optimism as 2013 drew to a close, and reports of capital spending increased significantly, but the index measuring business owners’ sentiment in December still fell below previous mid-year readings and trailed the pre-2008 recession average by six points, the National Federation of Independent Businesses said Tuesday. More

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Small-business optimism in U.S. on rise, but ‘shaky at best’

COURTESY NATIONAL FEDERATION OF INDEPENDENT BUSINESSES
BOLSTERED BY STRONG improvements in capital outlays, the National Federal of Independent Business's index of small-business optimism rose in December to 93.9. However, the reading still trailed the pre-2008 recession average by six points.
Posted 1/14/14

PROVIDENCE – Small businesses nationwide reported improved optimism as 2013 drew to a close, and reports of capital spending increased significantly, but the index measuring business owners’ sentiment in December still fell below previous mid-year readings and trailed the pre-2008 recession average by six points, the National Federation of Independent Businesses said Tuesday.

The NFIB’s December index of small-business optimism, based on the responses of 635 randomly sampled small businesses in NFIB’s membership, rose slightly from November to 93.9, driven by a 9 percentage point gain in reported capital outlays and a higher-than-expected rate of hiring by the business owners surveyed.

Owners increased employment by an average of 0.24 workers in December, seasonally adjusted, the best reading since February 2006. Overall, owners hired more workers on balance in December than their hiring plans indicated in November.

Meanwhile, the frequency of reported capital outlays over the past six months gained 9 percentage points in December, which the NFIB report called “a remarkable increase” that indicates a level of spending “more typical of a growing economy.” Sixty-four percent of survey respondents reported outlays, the highest level since 2005.

Despite these improvements, the NFIB report also pointed to several continued problem areas, including weak sales expectations, stagnant prices and a high percentage of small businesses reporting falling profits.

While the NFIB reported that Rhode Island small businesses echoed the sentiment of the national optimism survey, NFIB Rhode Island State Director Bill Vernon said the state faces unique challenges.

“The problem for Rhode Island is that it really needs a rising national economy to lift it up, and we’re just not seeing that,” said Vernon. “Providence could do more with some real pro-growth initiatives like tax reform and tort reform, but they have not been able to make the dramatic changes needed there either.”

Four percent of small business owners reported in December that all their credit needs were not met, unchanged from November and a historic low, while 32 percent reported all credit needs met and a record high 55 percent explicitly said they did not want a loan.

Only 2 percent cited financing as their top business problem compared with 23 percent citing taxes, 20 percent citing regulations and red tape, and 14 percent citing weak sales.

“While there has been no sign that a real recovery has begun, we can be encouraged that the economy is at least crawling forward and not heading in reverse,” said NFIB Chief Economist Bill Dunkelberg. “Two monthly advances could be the start of a more positive trend, but there are many threats to improvement, including the majority of respondents feeling the current climate is not ‘a good time to expand substantially’… The uncertainty that has contributed to our slow recovery is clearly still present – making any advances shaky at best.”

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