“Everything is politics,” novelist Thomas Mann once said, and the November Small-Business Optimism Index released Tuesday by the National Federation of Independent Business (NFIB) is no exception.
The Index dropped 5.6 points last month to a 87.5. In the 26-year history of the NFIB’s monthly survey (it has conducted quarterly surveys since 1974), only seven readings were lower, all but one in the last few months of 2008 and early 2009, the depths of the last recession.
The Index had risen to 93 points in October, then a five-month high. Whatever happened in November to cause such a dramatic decline? Don’t blame Hurricane Sandy, the report said. “When separating the hurricane-impacted states from the remainder, the data makes clear that the election was the primary cause of the decline in owner optimism,” the NFIB said in a statement. “The storm had a significant impact on the economy, no doubt,” said NFIB chief economist Bill Dunkelberg, “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… 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.”
The most significant factor that precipitated the decline in small-business optimism is a drop in the percentage of owners expecting better business conditions in six months, which fell 37 points to a net -35 percent. Only 9 percent (not seasonally adjusted) expect an improvement in business conditions, a drop of five points from the previous month), while nearly half (49 percent) expect deterioration, an increase of 30 points.
Nearly one-quarter (23 percent) still cite weak sales as their top business problem, which is down from the record 34 percent reading last reached in March 2010.
Small-business owners surveyed in November by Milionaire Corner, too, indicated at least a cautionary mindset regarding the economy. Seventy-three percent are not confident that the White House and Congress will reach a solution to avert the tax hikes and spending cuts scheduled to take effect at the end of the year. Eighty-four percent believe that their taxes will increase.