Small business confidence has fallen for the sixth consecutive month, according to a monthly survey conducted by the National Federation of Independent Business (NFIB).
The organization’s Small Business Optimism Index for August fell to 88.1, the lowest level since March 2010. It also marks one of the largest monthly declines over the last sixth months -- in July, small-business confidence was 89.9.
The index has steadily declined since February, when it reached a high of 94.5.
The NFIB indicated that because these results are the first to be released since the debate in Washington over the debt ceiling, small businesses have little confidence in the agreement reached by lawmakers.
“The tumultuous debate over the nation’s debt ceiling and a dramatic 11th hour ‘rescue’ by lawmakers did nothing to improve the outlook of job-makers,” said NFIB Chief Economist Bill Dunkelberg in a statement. “In fact, hope for improvement in the economy faded even further throughout the month, proving that short-term fixes will not help.
“Private sector decision makers think longer term and they don’t like what they see. There is little clarity or certainty. When people are uncertain about the future or fear it, they don’t spend or invest, and they chase after protection—and protection is unlikely to come from the government.”
According to the U.S. Small Business Administration, companies with fewer than 50 employees generated 65% of all jobs created over the last 17 years. Given the importance of small businesses in the United States economy, the NFIB’s optimism index provides a dim outlook for future employment. Up one point from July, 12% of small-business owners expect to reduce their payrolls over the next three months. Only 11% plan to increase employment over the same period, up one point from July.
The NFIB’s survey of 926 small businesses revealed that the decline in small-business confidence over the last month was largely caused by lower expectations for real sales gains and business conditions. Sales figures are the biggest concern for small businesses, as 25% of respondents identified poor sales as their primary business concern.
The number of business owners reporting higher nominal sales over the past three months continues to drop as well, falling to a seasonally-adjusted negative 9% as more businesses are experiencing a downward sales trend. Without adjustments, 27% of respondents said their sales figures over the last three months were higher than the previous quarter. The number of small- business owners reporting lower sales remained the same at 28%.
Business owners also are less optimistic about future business conditions. The net percentage of owners expecting better conditions is down 11 points from the July survey and 36 points since January.