Small Business Owners See Little Hope

For small business owners, the outlook remains uncertain and worrisome.

For the third consecutive month, NFIB’s Small Business Optimism Index fell — continuing at a recession-level reading for an economy fighting its way through a recovery. A leading cause of the low reading is the stubborn problem of weak consumer spending.

“Corporate profits may be at a record high, but businesses on Main Street are still scraping by. Washington is throwing misdirected policies at the problem, offering tax breaks for hiring and equipment investment, but acting surprised when they don’t bear any fruit,” said NFIB chief economist Bill Dunkelberg. “The failure to understand why small-business owners are not hiring or investing has resulted in a set of policies that have not been very effective, and Main Street is suffering. The icing on the cake: the growing debt, large deficits, threats of higher taxes, regulations being spewed out by state and local administrations, and the uncertainty of the new health care law—is it any wonder that optimism is down?”

And don’t forget about their inflation worries. We see in the results of this month’s survey that small business owners are beginning to take a proactive approach to pricing.  30-one per cent reported raising average selling prices which is twice the per cent of owners who are cutting prices.  This is clearly a behaviour we see when inflation worries are at hand.  Remember, they are raising prices even though demand is still looking like it will be at recessionary levels for some time to come.  Small businesses are generally not in a position to raise prices when demand is weak, but the fact that they can and they are should send alarm bells on how real impending inflationary times are for our economy.

I am disheartened to see that job market indicators continued to deteriorate among small business owners.  They just do not see a reason to grow their workforce.

Also, capital spending plans and inventory investment plans all weakened and remain at recession levels.

While some recent reports and surveys suggest some improvement in business optimism, only 5 per cent of the owners in the NFIB survey view the current period as a good time to expand; of those who view it as a bad time to expand, 71 per cent of those blame the weak economy, and 14 per cent cite political uncertainty. 

No new jobs.  No new capital spending.  Increasing prices even though sales continue to be sluggish.  Not a very encouraging set of economic indicators coming out of small business, which spells no recovery in our foreseeable future.

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