Biz Brief: Small Businesses Felt More Upbeat About Economy in May

Not unlike bears emerging from hibernation after a long winter, the nation's small businesses are slowly becoming more optimistic in the prospects for the U.S. economy as the Great Recession winds down. Still, entrepreneurs aren't yet ready to hire more workers or boost spending on new projects, according to a survey released Tuesday.

The National Federation of Independent Business Index of Small Business Optimism gained 1.6 points in May to 92.2, the highest reading since September 2008, and the second consecutive month of gain. Though seven of the 10 components within the index rose, job creation and capital expenditure plans barely gained and remained at recessionary levels, NFIB said.

"The performance of the economy is mediocre at best," said William C. Dunkelberg, NFIB chief economist. "Given the extent of the decline over the past two years, pent up demand should be immense, but it is not triggering a rapid pickup in economic activity."

Still, small-business owners were more upbeat about the future. The subindex of expected business conditions in six months rose eight percentage points to 8% in May.

The survey of 823 businesses through the end of May also showed companies still shed workers last month. "The small business sector is not contributing to private sector employment growth," NFIB said. Only 9% of companies reported unfilled job openings, while 7% planned to reduce unemployment and 14% looked to create jobs.

The percent of owners planning to make capital improvements during the next few months rose one point to 20%, four points above the 35-year record low, NFIB noted. But only 5% characterized the current period as a good time to expand.

Flagging sales remain a big concern for small business owners. Last month's reading showed more firms are experiencing weakening sales than those that are seeing improvements.