The Economy

Small-Business Confidence Drops Sharply

NFIB optimism index falls four points, "a disappointing sign that economic growth on Main Street is not set for a strong second half," says Bill Du...
Matthew HellerJuly 14, 2015
Small-Business Confidence Drops Sharply

Small-business owners’ optimism about the economy took a surprisingly sharp turn for the worse in June, likely reflecting five months of “lousy growth,” according to the National Federation of Independent Business.

In its June report, the NFIB said its small-business optimism index fell 4.1 to 94.1 in June. Economists surveyed by The Wall Street Journal had projected the index would stay almost unchanged at 98.4. The index’s pre-recession average was 99.5.

“June terminated a promising string of improvements in owner optimism during the first months of the year,” NFIB Chief Economist Bill Dunkelberg said in a news release. “While it is not a disaster or a signal of a looming recession, it is a disappointing sign that economic growth on Main Street is not set for a strong second half.”

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

“The weakness was substantial across the board, showing no signs of a growth spurt in the near future,” he added.

None of the 10 index components increased in June, with nine declining and one (expected credit conditions) being unchanged. The largest decline was in the earnings trend subindex, which took a 10% nosedive.

The NFIB also found that the net percentage of small business owners reporting higher nominal sales in the past three months compared with the prior three months fell 9 points to a net -6%.

“Given the pessimism, it is no surprise that small firms rethought expansion plans last month,” The Wall Street Journal said. The subindex covering planned hiring fell three percentage points to 9%, and the capital spending plan subindex fell two points to 23%.

David Ader of CRT Capital said in a note to clients that the NFIB data were “not a recession signal, but not supportive of an optimistic view of growth in the second half” of 2015.

“The President continues to push regulations to pay people more in higher wages, more overtime, health insurance, etc.,” the NFIB said. “However, he does not pursue policies that help increase productivity. Higher pay with the same output means inflation or unemployment or both, neither being good for workers or businesses.”

Featured image: Thinkstock