The National Federation of Independent Business (NFIB) Small Business Optimism Index rose 0.3 in October to 93.1; the slight uptick in the reading did not seem to indicate a dramatic shift in owner sentiment over the course of the month.
The survey, conducted before the presidential election, found that the percent of owners uncertain about whether business conditions will be better or worse in six months, was at a record high (23 percent). This eclipsed the pre-recession record of 15 percent reached during the Carter Administration. NFIB’s forward labor market indicators weakened last month, and owner views of the future do not foresee much improvement in economic growth.
“While four of ten survey components rose, the Index still remains in solidly pessimistic—and recessionary territory,” said NFIB chief economist William Dunkelberg. “In the 40 months since the alleged ‘recovery’ started in July 2009, the Index has never exceeded a reading of 95; the pre-recession average for the Index is 100. The election is over and Washington looks much like it did on November 5th. The fear of stalemate among the small-business community is palpable, as the looming fiscal cliff and the threat of higher costs and more taxes are very real possibilities come January. Until then, not knowing the direction of the economy will always have a dampening impact on spending and hiring.”
One indicator that rose slightly in October is the frequency of reported capital outlays in the past six months, increasing 3 points to 54 percent. Similarly, the percent of owners planning capital outlays in the next three to six months rose one point to 22 percent. These positive changes, however, are unlikely a sign that capital spending might return to levels more consistent with past recovery periods, as only seven percent characterized the current period as a good time to expand facilities.
Access to credit continues to be low of the list of small-business owner concerns. Twenty-eight (28) percent reported all credit needs met, and 52 percent explicitly said they did not want a loan (64 percent including those who did not answer the question, presumably uninterested in borrowing as well). Eight percent of those surveyed reported that all their credit needs were not met, and only three percent reported that financing was their top business problem. Thirty (30) percent of all owners reported borrowing on a regular basis, down 1 point from September. A net seven percent reported loans “harder to get” compared to their last attempt (asked of regular borrowers only), which is up 1 point from September. Three percent of owners reported higher interest rates on their most recent loan, while another three percent reported getting a lower rate. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative eight percent (more owners expect that it will be “harder” to arrange financing than easier), down 1 point from September.
Download the complete NFIB study.