Small-Business Confidence Rises for Third Consecutive Month

Small-Business Confidence Rises for Third Consecutive Month
Is Hope for the Economy on the Horizon?

WASHINGTON, December 13, 2011 – Small-business optimism rose for the third consecutive month, gaining 1.8 points in November, and settling at a still weak 92.0, according to the National Federation of Independent Business’ (NFIB’s) latest index. The majority of index components (8 of 10) improved or did not change from the previous reading; the most notable increases posted in expectations for real sales gains and the outlook for
business conditions. Optimism appears to have climbed because fewer owners expect business conditions or sales to be worse in six months, indicating some hope on the horizon. Improvement, although small, was widespread with the forward-looking components indicating positive trends for the first time in many months.

“After so many months of pessimism, November’s modest gain made it feel like spring, again,” said NFIB Chief Economist Bill Dunkelberg. “We have good reason to be optimistic about last month’s report and hopeful about what it means for the future. Still, our current reality is still very much the ongoing economic winter. November’s reading is still well below the average reading prior to 2008 levels from previous recoveries. More acutely, it is 2 points below January’s index, which means that there has been no progress over the calendar year. We should be encouraged, but cautiously so.”

According the November’s survey, the percent of owners reporting “poor sales” as the top problem remained stubbornly high at 25 percent followed by 19 percent reporting both taxes and regulations. Inflation remained unchanged at six percent and interest rates fell 1 point to three percent as owners’ top problem.
Some other highlights of November’s Optimism Index include:

• Sales reports improved in November, albeit marginally, and still remaining negative overall, rising to a net negative 11 percent, with more firms reporting sales trending down than up. As in previous months, a full quarter of ownersindicated “poor sales” is their top business problem. Unadjusted, 21 percent of all owners reported higher sales (last three months compared to prior three months, down 1 point) while 29 percent reported lower sales (down 1 point).
  Most of the reports on sales volume were made before “Black Friday”; the impact of that level of spending will show up in the December reports on sales. The net percent of owners expecting higher real sales gained 8 points to a net 4percent of all owners (seasonally adjusted), but still 9 points below January 2011’s reading.
• The net percent of owners expecting better business conditions in six months was a negative 12 percent, 4 points better than October, but still 22 percentage points below January’s reading. Not seasonally adjusted, 29 percent expect deterioration, 12 percent expect improvement. A net four percent of all owners expect improved real sales volumes, a huge 8 point gain over October.
• The employment picture brightened last month, ending five months of decline. In November, NFIB owners reported an overall increase in employment of 0.12 workers per firm in November. Seasonally adjusted, 13 percent of the owners added, while 11 percent reduced employment. The remaining 76 percent of owners made no net change in employment. Forty-seven percent of owners hired or tried to hire and 35 percent of them reported few or no qualified applicants for positions. Sixteen percent (seasonally adjusted) reported hard to fill job openings, up 2 points from the previous month.
• Future hiring plans were also positive. Over the next three months, a seasonally adjusted net seven percent of owners plan to create new jobs—a 4 point improvement from October and the strongest reading in 38 months. Historically,during an expansion plans to hire should be in in the double digit levels.
• The frequency of reported capital outlays over the past six months rose 1 point to 53 percent, the second monthly increase in succession after languishing between 45 and 52 percent for the last 12 quarters. The percent of owners planning capital outlays in the next three to six months rose 3 points to 24 percent, the highest reading in 40 months (also reached in March this year). Money is available, but most owners are not interested in a loan to finance the purchase of equipment they cannot use. Only eight percent characterized the current period as a good time to expand facilities (seasonally adjusted), up 1 point and only 1 point below the best reading in the past 38 months.

Today’s report is based on the responses of 781 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of November. Download the complete study at http://www.nfib.com/sbetindex.

###

NFIB’s Small Business Economic Trends is a monthly survey of small-business owners’ plans and opinions. Decision makers at the federal, state and local levels actively monitor these reports, ensuring that the voice of small business is heard. The NFIB Research Foundation conducts some of the most comprehensive research of small-business issues in the nation. The National Federation of Independent Business is the nation’s leading small-business association. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals.

For more information contact the NFIB:

Cynthia Magnuson 202-314-2036 (media)
Holly Wade 202-314-2022 (research)