Small Business Optimism Faded in June

Old-fashioned Main Street
Old-fashioned Main Street

The National Federation of Independent Business (NFIB) this morning reported a drop of 0.9 points in its small business optimism index, from 94.4 in May to 93.5 in June. The May index was the second highest since December 2007.

Of the 10 index components, the NFIB recorded losses in six, with spending plans remaining flat and new hiring down one point. The largest gain among the 10 components of the index came in plans to increase employment, which rose just two points to a net 7% reading.

The NFIB's chief economist said:

After two months of incremental but solid gains, the Index gave up in June. This appears par for the course, given that there is no reason for small employers to be more optimistic and lots of things to worry about. Washington remains bogged down in scandals and confidence in government's ability to deal with our fundamental problems remains low.

Sales were reported down a net 8% in June, double the net 4% drop in May. However, expectations rose by 5% for sales during the next three months, but that was below the 8% increase in expectations posted in May.

Some 18% of small business owners plan to raise prices in the next three months.

The biggest drags on independent businesses, according to the survey, were taxes and regulations and red tape (both noted by 20% of respondents) and poor sales (noted by 18%).

As the NFIB points out, the small business portion of gross domestic product is generating little growth. And, according to the group, large enterprises are now losing ground as well. The U.S. economy might be growing, but the growth is slow, and especially slow for small business owners.

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