After six months of gains, the Small-Business Optimism Index fell by almost 2 points in March, settling at 92.5. After a promising start to the year, nine of ten index components dropped last month, most notably hiring plans and expected real sales growth each taking a significant dive, in spite of owners reporting the largest increase in new jobs per firm in a year.
“March came in like a lion, with Main Street seeing significant job growth in March—but it appears to have gone out like a lamb, and with no cheer in the forward-looking labor market indicators. What could have been a trend in job growth is more likely a blip,” said National Federation of Independent Business (NFIB) Chief Economist Bill Dunkelberg. “And what looked like the start of a recovery in profits fizzled out. The mood of owners is subdued—they just can’t seem to shake off the uncertainties out there, and confidence that the management team in Washington can deal with the effectively is flagging. What we saw in March is painfully familiar – this was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself—and not in a good way.”
The March survey results ended what appeared to be steady, albeit slow, trend of improvement for the small-business sector of the economy. The percent of owners reporting inflation as their No. 1 business problem is now at 9%, an increase from 6% in January. Reports of increases in average selling prices are rising and net 21% of the owners plan to raise their selling prices in the coming months.
Capital Expenditures
The frequency of reported capital outlays over the past six months fell 5% to 52%, a reversal of the gains made during the two months prior. Of those making expenditures, 36% reported spending on new equipment (down 4%), 20% acquired vehicles (down 3%), and 13% improved or expanded facilities (unchanged).
Four percent acquired new buildings or land for expansion (down 1% and 11% spent money for new fixtures and furniture (down 1%).
Plans to make capital outlays in the next three to six months fell 1%, with 22% of owners indicating they are likely to make the investment. Seven percent of owners characterized the current period as a good time to expand facilities (seasonally adjusted), and the net percent of owners expecting better business conditions in six months settled at a negative 8%.
Credit Access
Financing continues to be low on the list of concerns for small-business owners. Only 4% cited financing as their top business problem, compared to 20% citing taxes and 19% citing unreasonable regulation. 92% percent reported that all their credit needs were met or that they were not interested in borrowing. 27% percent reported all credit needs met, compared to 8% who reported that not all of their credit needs were satisfied.
Just over half of owners said they did not want a loan, and 13% did not respond to the question. Thirty-one (31) percent of all owners reported borrowing on a regular basis. A net 11% reported loans are “harder to get” compared to their last attempt (asked of regular borrowers only), also down 3%. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative 11% (more owners expect that it will be “harder” to arrange financing than easier), 1% worse than February.
To read the full NFIB press release, click here.