Optimism among small business owners has fallen, according to a recent survey released by The National Federation of Independent Business Education Foundation
The Small Business Economic Trend survey found that Small-Business Optimism fell 2.3 points to 97.2 in June. Taken with the survey data of the last few months, the June figures suggest that the small-business economy may be in a “saw tooth pattern,” bouncing along at this relatively low level without ever dipping into a technical recession.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
“A recession is still not in our forecast; growth is positive, but close to the edge,” said Bill Dunkelberg, NFIB chief economist. “The road ahead looks pretty flat — no serious dips, but no elevation either – the long leg of the L, not a U or a V.”
Important trends in the Index components include:
- Hiring plans remained constant from the previous month at the lowest reading since 1994.
- Fewer firms reported that finding qualified labor (skilled or unskilled) was the most important problem faced by their firm, but slightly more firms than last month reported hard-to-fill job openings.
- Fewer firms reported raising average selling prices. The ten-year peak for price hikes were reached in June 2000.
- Capital spending plans for the next few months have fallen. Also, fewer firms reported actual outlays in the last six months.
Sales: Reports of sales declines soared in June, with a net-14 percent of all firms reporting recent months’ sales above prior-3 months’ performance — a 10-point deterioration from already poor levels. This is the poorest reading in survey history. Reports of sales declines have not been this pervasive since 1990 and expectations for sales gains are the most negative since 1993 – e.g. these are recession-type numbers. The only difference may be the magnitude of the declines.
Earnings: Widespread sales declines produced the highest frequency of reported profit declines since 1991. Eighteen percent reported that profits were rising, but 44 percent reported that earnings weakened. Half of those who did report higher earnings said that the cause was increased sales. Six percent cited lower labor costs and lower materials costs and 12 percent cited higher selling prices.
Prices: The net percent of firms reporting higher average selling prices fell to 11 percent of all firms, of a 2-point decline. This takes the CPI headline inflation forecast down to 3 percent. Unadjusted, 21 percent reported increases in average selling prices in the past three months (down 2 points) and 11 percent reported reductions in average selling prices (up 2 points). Seventy-one percent of the hikes were under 5 percent. The frequency of price hikes planned for coming months fell 1 point to a seasonally adjusted net 19 percent of all firms.
Employment and Compensation: Lots of jobs were lost as small business continued to shed labor. The NFIB survey found a reduction in employment averaging .1 employee per firm. The percent of firms with at least one “hard to fill” job opening rose a point to 27 percent of all firms, indicating an unemployment rate just shy of 5 percent. A net 29 percent reported raising worker compensation over the past three months, down 2 points and 5 points below the record high reached three months ago. Future plans to raise compensation fell 3 points.
Credit condition: The percent of firms citing credit issues as their number one business problem remained at a very low four percent of all firms, and virtually all borrowers reported no difficulty satisfying their borrowing needs. Only 5 percent reported that loans were harder to get while 2 percent reported that financing go “easier.” The average interest rate paid on short-term loans fell 20 basis points to 9.1 percent. Overall, credit markets remain very friendly and are expected to remain so.
Inventories: The seasonally adjusted net percent of firms reporting inventory accumulation in June was minus 2 percent. Small firm aren’t accumulating inventory. Satisfaction with existing stocks improved a bit, with a seasonally adjusted 2-point improvement from May readings. Plans to add inventories faded further, falling a point to a seasonally adjusted net 2 percent of all firms. Overall, it is clear that small businesses do not have a serious inventory problem and that they have been gradually reducing holdings as sales have faded throughout the first half of the year.
Capital outlays: More weakness appeared in capital spending plans, which fell another pint in frequency to 30 percent of all firms. It is clear that planned capital spending activity has geared down. Now plans seem to be weakening further, providing some support for the notion that the slowdown is driven by capital spending weakness as much as it is by lower consumer spending. Reports of actual outlays in the past six months dropped 5 points to 62 percent of all firms.
