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Are you becoming more optimistic?

Optimism among small business owners is rebounding nationwide, according to a report issued by the National optimismFederation of Independent Business (NFIB), a small business advocacy group. The report on small business optimism rebounded 5.8 points in April.

Although optimism is increasing, NFIB Chief Economic William Dunkelberg said, “The report indicated no immediate turnabout as the improved numbers were still very low.”

NFIB said the “real bounce” was in the soft indicators, the “feel good” portion of the survey. The outlook for general business conditions moved sharply higher, jumping by 24 points and leaving a majority judging that conditions would improve over the next three to six months. Expectations for gains in real sales increased 20 points, rising to a net-negative 11 percent expecting improvements—still negative but a solid move up from the March record low.

Despite hopeful thinking, employment, capital outlays, inventories, sales, and earnings remain at historically low levels.

• Employment. Although 4% of owners increased employment over the last three months, 30% reduced it.

• Compensation. The report indicated 11% of owners are cutting compensation and a near-record low 12% reported raising pay levels to keep a lid on labor costs.

• Capital spending. Capital outlays over the past six months fell four points, 10 points lower than this time last year. Owners are deferring project not essential to business survival.

• Inventories and sales. Small business owners continued to liquidate inventories. A net 27% of all owners reported lowered inventory stocks, four points worse than March, and a new record low.  

• Inflation. Only 12% of owners reported raising their average selling prices (down a point), while 34% reported reductions in average selling prices.

• Earnings. April’s profits improved three points, but the month’s readings stood at a net-negative 43 percentage points.

• Credit.   Thirty-three percent reported regular borrowing, typical of the past 20 years. Thirty percent reported all their borrowing needs met (up a point) compared to 8 percent who reported problems obtaining desired financing (down two points). The net percent reporting all borrowing needs satisfied rose three points to 22 percent. 

The net percent of owners reporting loans harder to get rose to 14 percent of all firms, the highest reading since the 1980-82 recession period. Four percent of owners reported finance as their No.1 business problem, unchanged for years. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted net negative 12 percent.

NFIB conducts a monthly survey of small business owners’ plans and opinions.

Source: NFIB, www.nfib.com


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