Survey: Small biz confidence falls in June
Highlights from the NFIB’s report:
Small-business optimism remained in tepid territory in June, as the National Federation of Independent Business’ monthly economic Index dropped just under a point (0.9) and landed at 93.5 – effectively ending any hope of a revival in confidence among job creators.
Six of the 10 Index components fell, while two rose and two were unchanged.
Job creation plans were slightly higher in June, but expectations for improved business conditions remained negative. The Index has been teetering between modest increases and setbacks for months. It was 12 points higher in June than at its lowest reading during the Great Recession, but it was still 7 points below the pre-2008 average and 14 points below the peak for the expansion.
State-specific data isn’t available, but business owners here are just as wary as those in other states, said Ron Aldridge, state director of NFIB/Mississippi, the state’s leading small-business association.
“There’s no reason for small-business owners to feel optimistic right now, and there are plenty of things to worry about, like the looming ‘HIT’ of the health-insurance tax and a flood of new rules and regulations flowing out of Washington,” he said.
“After two months of incremental but solid gains, the Index gave up in June,” said Bill Dunkelberg, NFIB’s chief economist. “Washington remains bogged down in scandals and confidence in government’s ability to deal with our fundamental problems remains low.
The top business problems for small-business owners in June were taxes and regulations and red tape, with 20 percent of those surveyed ranking each as their No. 1 problem. Another 18 percent of owners cited weak sales as their top problem, but only 2 percent reported that financing was a major concern.
• Job Creation. Small-business owners were not able to contribute to job growth again in June, with the average increase in employment coming in at a negative 0.09 workers per firm, essentially zero. While 360,000 new part-time jobs were added, about 240,000 full-time jobs disappeared.
Hard to Fill Job Openings. Nineteen (19) percent of all owners surveyed reported job openings they could not fill in the current period (unchanged). Twelve (12) percent of owners reported using temporary workers, little changed over the past 10 years. The health care law provides incentives to increase the use of temporary and part-time workers, but this indicator has not registered a trend toward the use of more temps.
Sales. The net percent of all owners* reporting higher nominal sales in the past three months compared to the prior three months gave up 4 points, falling to a negative 8 percent. The net percent of owners expecting higher real sales volumes lost 3 points, falling to 5 percent of all owners. The poor expectations do not anticipate new employment or new orders for inventories.
Earnings and Wages. Reports of positive earnings trends deteriorated 1 point in June to a negative 23 percent. Four percent of owners reported reduced worker compensation and 19 percent reported raising compensation, yielding a seasonally adjusted net 14 percent reporting higher worker compensation (down 2 points). A net 6 percent of those surveyed plan to raise compensation in the coming months, down 3 points.
Credit Markets. Credit continues to be a non-issue for small employers, five percent of whom say that all their credit needs were not met in June, unchanged from May. Twenty-nine (29) percent of owners surveyed reported all credit needs met, and 53 percent explicitly said they did not want a loan (67 percent including those who did not answer the question, presumably uninterested in borrowing).
Capital Outlays. In June, the frequency of reported capital outlays over the past six months fell 1 point to 56 percent, 9 points below the average spending rate through 2007. The percent of owners planning capital outlays in the next three to six months was unchanged at 23 percent. The frequency of expenditures remained at the high end of recession-level readings, but there is no surge in capital spending on the horizon.
Good Time to Expand. In June, only Seven percent characterized the current period as a good time to expand facilities (down 1 point). The net percent of owners expecting better business conditions in six months was a net negative 4 percent, a 1 point improvement.
Inventories. The pace of inventory reduction continued in June, with a net negative 7 percent of all owners reporting growth in inventories, unchanged from May. For all firms, a net negative 2 percent (down 3 points) reported stocks too low, a sharp deterioration from May and consistent with weak spending which produces a buildup in stocks. Also, plans to add to inventories declined sharply; the net percent of owners planning to add to inventories fell 4 points to a negative 1 percent of all firms.
Inflation. Twelve (12) percent of the NFIB owners surveyed reported reducing their average selling prices in the past three months (down 4 points), and 19 percent reported price increases (unchanged). The net percent of owners raising selling prices was 8 percent, up 6 points. As for prospective price increases, 19 percent plan on raising average prices in the next few months (up 2 point), and 3 percent plan reductions (unchanged). A net 18 percent plan price hikes, up 3 points.