The Economy

Election Drags Down Small Business Optimism

"Small business owners are deeply uncertain about the future, and that is affecting their decisions,” the NFIB says.
Matthew HellerOctober 12, 2016
Election Drags Down Small Business Optimism

Small-business owners’ optimism about the economy declined for a second straight month in September, reflecting uncertainty ahead of the presidential election, according to the National Federation of Independent Business.

In its latest monthly report on small business economic trends, the NFIB said its small-business optimism index fell to 94.1 last month from 94.4 in August’s. Economists surveyed by The Wall Street Journal had projected the index would rise to 95.0. The index’s pre-recession average was 99.5.

Of the 10 index components, four posted a gain and six declined. A huge improvement in the outlook for business conditions was offset by large losses in job openings, inventory satisfaction and plans for inventory investment.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“The bottom line is that small business owners are deeply uncertain about the future, and that is affecting their decisions,” NFIB Chief Executive Juanita Duggan said in a news release.

According to Bill Dunkelberg, the federation’s chief economist, small business owners won’t be hiring or building inventories both of which signify confidence in the economy until something changes in Washington.

“It is quite clear that the top issues for small-business owners will not be addressed this year,” he said. “The presidential election is so divisive that it offers little promise of a bipartisan effort to deal with any of these important issues.”

More than half of small businesses surveyed (58%) reported hiring (up 2 percentage points), but 48% percent found few or no qualified applicants for the positions they were trying to fill. Seventeen percent of owners said the difficulty of finding qualified workers was their single most important business problem.

Seasonally adjusted, the next percent of owners expecting higher real sales volumes rose 5 points to a net 4% of owners, but the net percent of owners viewing current inventory stocks as “too low” deteriorated 5 points to a net negative 7%, indicating weak demand for new inventory spending.

“Clearly, expectations for the economy are not conducive to a meaningful improvement in business investment as prospects for sales and profits are poor,” the report said.