News Column

Small-business Confidence Low, Optimism Index Declines

Dec. 13, 2012

The NFIB Small Business Optimism Index took a nose dive in November to 5.6 points, marking one of its largest-ever drops, according to a report by the National Federation of Independent Businesses (NFIB).

This was the largest one-month drop since 1987 on a negative response to last month' s presidential election and a dramatic drop in owner confidence. States ravaged by Hurricane Sandy were excluded from the survey, with the election being the primary cause for the index' s drop.

"Something bad happened in November-and based on the NFIB survey data, it wasn' t merely Hurricane Sandy. The storm had a significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence," said NFIB chief economist Bill Dunkelberg.

"Nearly half of owners are now certain that things will be worse next year than they are now. Washington does not have the needs of small business in mind. Between the looming 'fiscal cliff,' the promise of higher health-care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism," he said.

"We are forced to ask: is this the new normal?" he asked.

The most significant factor impacting the decline in optimism is the expectation that future business conditions will be worse than current ones, the report found.

The net percent of owners expecting better business conditions in six months fell 37 points to a net negative 35 percent. In October, the percent of owners who said they were uncertain as to whether business conditions would be better or worse in six months hit a record low of 23 percent. Many of those who were uncertain about the economy in October became decidedly negative in November.

Forty-nine percent of the owners now expect business conditions to be worse in six months, while 11 percent still express uncertainty about the future.

In the history of the monthly index, only seven readings were lower, all but one in the last few months of 2008 and early 2009, the depths of the last recession. Prior to 1986 when the survey was conducted on a quarterly basis, there were just two readings lower.

Source: (c) 2012 Xinhua News Agency - CEIS. All rights Reserved.

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters