Small Business Optimism Basically Unchanged in January:NFIB

Small business confidence remains at recession levels, the National Federation of Independent Business announced Tuesday. Its Small Business Optimism Index for January settled at 93.9, an increase of just one-tenth of one percent in January, a slight increase from the previous month.

The index has now shown five consecutive months of improvement, but the readings from January and February a year ago were higher, and while small business owners appeared to be less pessimistic about the business conditions and real sales growth, that optimism did not materialize in hiring or increased inventories plans, the NFIB reported.“The most positive statement that can be made about January’s reading is that the index did not go down,” observed NFIB Chief Economist Bill Dunkelberg. “Nothing happened last month that would significantly improve the small business outlook; Washington is at a stalemate. Congress has failed to pass a budget for over 1,000 days.”

And counting. President Barack Obama unveiled a record $3.8 trillion budget plan Monday that proposes to cut the deficit by $4 trillion over the next decade, but it would do so partly through tax increases that Congressional Republicans oppose.

On the jobs front, the NFIB reports that 41 percent of owners hired ot tried to hire in the past three months, but 31 percent reported few or no qualified applicants for the positions.

Fewer companies made capital expenditures over the past six months, but at 55 percent, this component remains above the record low of 44 percent reached most recently in August 2010. The biggest spending was on new equipment (38 percent, down 4 points), vehicles (20 percent, unchanged) and improved or expanded facilities (13 percent, unchanged).

Nearly a quarter (24 percent) plan capital outlays in the next three to six months, the highest reading in years. However, it is still 10 points lower than those typically seen in an expanding economy, the NFIB cautions.

The next percent of small business owners expecting better business conditions in six months was at -3 percent, a 5 point improvement over December, but 14 percentage points below last year’s reading. Twenty-two percent expect improvement (up 7 points), while the percentage who forecast a decline in business conditions is down 4 points.

Twenty-two percent reported “poor sales” as their top business problem, down 1 point, but still the most oft-cited business problem cited. Overall, small business owners have appeared to reduce inventories given their outlook for sales growth. Plans to add to investories lost 5 points to a seasonably adjusted net -3 percent of all forms, falling from the December reading which was the best in 18 months.