Small Business Sentiment Slides on Economic Uncertainty
For the past two years, small business optimism has remained at historic highs. While that was still the case in November, the National Federation of Independent Business’s Small Business Optimism Index did see a slide, reaching a seven-month low. Although the 2.6 point decline wasn’t massive by any means, as MarketWatch reports, there were some interesting takeaways from this month’s report that show some entrepreneurs starting to worry slightly.
Unlike in many previous months that brought positive gains to at least some of the index’s components, this month saw mostly declines, with only two components (“plans to increase employment” and “expected credit condition”) remaining flat compared to last month. The most notable decline was in the number of small business owners who expected the economy to improve. That response fell by 11 point month over month to land at 22% in November. Still, when asked about what factors made now a good or bad time to expand, the top response was that current economic conditions made it a good time. Meanwhile respondents were most unsure about what the political climate meant for the expansion prospects.
Arriving about the same time as the NFIB’s latest index report, a separate study by CNBC and SurveyMonkey showed similar findings. That index fell from its record high of 62 last quarter to 59 this time around. This also marks the first time in six quarters the index has seen a decline. One of the larger changes bringing this latest figure down is that only 34% of owners expect the GOP-backed tax bill to have a positive effect on their business in the next 12 months, marking a 12 point decline from the beginning of this year.
Citing yet another recent survey, National Small Business Association president Todd McCracken told CNBC that slowing economic growth was starting to concern some entrepreneurs. He said, “We found that 40% said they are less optimistic about the outlook of the American economy. That could be driven by partisan allegiances, worry over economic predictions or just a general sense of ‘waiting for the other shoe to drop’ after a period of notable economic gains, but the fact remains — 40% are less optimistic, and that has real-world implications for growth.” Adding to the concerns are the continued issues businesses face when trying to hire skilled workers. As NFIB chief economist Bill Dunkelberg put it, “Everything is good in this economy, and we will keep moving along, but growth won’t be as fast as it could have been if we could fill these job roles.”
Perhaps that analysis is exactly the key to understanding these falling indexes. Unfortunately there’s no easy solution to the “catch 22” issue just yet. Because of this it seems likely that these historically high optimism levels will continue to slip as more business owner wonder if we’ve already past the peak.