Survey: Small Businesses Pessimistic About Business Conditions

August 9, 2011 - 10:29 AM
Small business confidence in ‘dangerous free fall,’ congressman says

( - A group that bills itself as the "voice of small business" says its monthly "optimism index" has fallen for a fifth consecutive month, as expectations dim for real sales growth and improved business conditions in the months ahead.

Rep. Sam Graves (R-Mo.), chairman of the House Small Business Committee, said the index shows that small business confidence is in a “dangerous free fall.”

The National Federation of Independent Business (NFIB) says its Small-Business Optimism Index dropped 0.9 points in July -- a larger decline than in each of the previous three months. The July index settled at a disappointing 89.9, NFIB said, below the average index reading of 90.2 for the last two-year "recovery period."

“Given the current political climate, the protracted debate over how to handle the nation’s debt and spending, and now this latest development of the (S&P) debt downgrade, expectations for growth are low and uncertainty is great,” said NFIB Chief Economist Bill Dunkelberg.

“At the two year anniversary of the expansion, the Index is only 3.4 points higher than it was in July 2009. And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course.

“Perhaps we might begin referring to the ‘Small-Business Pessimism Index’ from now on,” Dunkelberg said.

NFIB said next month's report will offer a more complete assessment of Main Street's reaction to the debt-ceiling deal.

The July survey -- based on the responses of 1,817 randomly sampled small businesses in NFIB’s membership -- anticipates slow growth for the remainder of the year, high unemployment rates, inflation rates that are too high and little progress on job creation.

Other highlights of July’s Optimism Index:

-- Over the next three months, 10 percent of small businesses plan to increase employment and 11 percent plan to reduce their workforce, yielding a seasonally adjusted 2 percent of owners planning to create new jobs, 1 point lower than in June, leaving the prospect for job creation bleak.

-- Currently, there are more firms with sales trending down than there are with sales trending up, although this category did show some improvement.

-- The net percent of owners expecting better business conditions in six months was a negative 15 percent, 25 percentage points lower than January. A path to economic recovery is clearly not visible to many small-business owners, NFIB said.

Small Business Committee Chairman Graves said small businesses clearly are worried about regulatory requirements, future tax burdens, unsustainable government spending, and massive debt dragging down the U.S. economy.

“What Washington needs to do is provide certainty for small businesses by reducing burdensome regulations, reforming our tax code, quickly passing free trade agreements, and addressing our out-of-control federal debt.”

Rep. Graves noted that small businesses employ more than half of all American workers, and 99 percent of businesses with payrolls in this country are small firms.

Graves said entrepreneurship and small business growth is the solution to the nation’s stubbornly high unemployment rate. “However, Washington must help provide an environment for this type of growth and then get out of the way so that the private sector can thrive.”