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Small-Business Owner Confidence Edges Up in February

"Until owners’ forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy."

| BY Donald Liebenson

In what the NFIB called “a nice improvement over the last several reports,” its Index of Small Business Optimism increased 1.9 points in February to 90.8. This is on par with the 2008 average and below the trough of the 1991-92 and 2001-02 recessions, the NFIB reported Tuesday.

The index has now shown six consecutive months of improvement. Of the 10 Index components, eight improved, including gains in capital spending and inventory investment plans. But by historical standards, the NFIB emphasized, the levels remain very low, and the latest Index as a whole “is not indicative of a surge in confidence among small-business owners.”

Tamping down small-business confidence, observed NFIB chief economist Bill Dunkelberg, is the as-ever fiercely partisan political climate and continued gridlock preventing progress on the economic recovery. “Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the sequester,” Dunkelberg said in a statement. “Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship.”

Weak sales is the top business problem for the highest percentage of responding small-business owners (18 percent). The seasonally adjusted net percent of all owners reporting higher nominal sales over the past three months compared to the prior three months was unchanged in February, at a negative 9 percent. Nineteen percent of all owners reported higher sales (last three months compared to prior three months, unchanged) and one-third reported lower sales (up 1 point).

Consumer spending remains weak, especially on services although durable goods sales have recently shown some strength, the NFIB reports. Not seasonally adjusted, 33 percent expect improvement over the next three months (up 8 points) and 24 percent expect declines (down 8 points).

The latest Index is based on the responses of 870 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of February, when the debate over the sequester dominated economic news.

“The Index gained almost 2 points last month; that was good news,” Dunkelberg concluded, “but (three-quarters of small-business owners think that business conditions will be the same or worse in six months and)…until owners’ forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy.”

About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.