Small business optimism gained 0.8 points in September, according to the National Federation of Independent Business' latest index, ending a six-month decline. However, the NFIB's chief economist cautioned that in spite of this uptick, there is little among the 10 index components that can be considered "positive." Reports of owners expecting real sales to improve were higher than the previous month, but were still negative. Similarly, owners expecting better business conditions in six months increased modestly, but this reading also remained negative.
Twenty-eight percent of small business owners reported that their top business problem is still poor sales. In fact, poor sales has been the top business problem for small business owners for the past three years, according to NFIB research. The net percentage of owners expecting better business conditions in six months was a negative 22 percent, up 4 points from August, but 32 percentage points lower than January. Not seasonally adjusted, 38 percent expect deterioration and only 9 percent expect improvement.
"An increase in consumer spending would be the best imaginable stimulus right now, not gimmicky Washington policies," said NFIB Chief Economist Bill Dunkelberg. "Promising temporary tax cuts financed by permanent income tax increases will not help many small business owners who pay taxes based on personal--not corporate-- tax rates. The key to economic recovery is restoring the confidence of consumers; only then will small businesses begin to see the sales they need to expand. If consumers fear the path we are on, then 'less is more' policies that reduce the size of government will increase confidence."
The net percentage of all owners (seasonally adjusted) reporting higher nominal sales over the past three months lost 1 percentage point, falling to a net negative 10 percent, with more firms reporting sales trending down than those who report sales trending up. While still negative, the NFIB noted this is one of the best readings in over 40 months. Unadjusted, 25 percent of all owners reported higher sales (down 2 points) while 29 percent reported lower sales (up 1 point).
However, the future for small business sales also remains weak. The net percentage of owners expecting higher real sales gained 6 points from August to a net negative 6 percent of all owners (seasonally adjusted), but still 19 points below January's reading. Over the next three months, 22 percent of owners (not seasonally adjusted) expect improvement (up 1 point) and 36 percent expect declines (up 2 points). The NFIB said based on those numbers, it would appear that owners have lost confidence in the economy and perhaps even in the government's ability to assist in the recovery.
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Small Business Confidence Sees Modest September Gain: NFIB
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