Small Business Index Declines Month-to-Month as Fewer Owners Believe Economy Will Improve

The National Federation of Independent Business business monthly optimism index declined in March as fewer small business owners expect the economy to improve. Still, index components are still at historically high levels.

The index came in at a 104.7 reading, down from 107.6 in February, the NFIB said.

About 32% of owners said they believe the economy will improve, down 11 percentage points from February, the biggest decline of any metric, the group said in a report on Tuesday. Some 20% expect real sales to be higher, down 8 points from the month-earlier period.

Plans to make capital outlays and increase inventories, current inventories and expected credit conditions all fell 3 percentage points in March. Some 28% said now is a good time to expand, down 4 points from February, according to the NFIB report.

The only components that increased in the index were plans to increase employment, with 20% saying they may add workers, up 2 percentage points, and current job openings, which rose 1 point, according to the group. Another positive, the federation said, was that taxes were not listed as the No. 1 problem for small business owners for the first time since 1982.

“Although expected sales and expected business conditions posted large declines, it was from historically high levels and this still left the overall Index reading among the 20 best in survey history,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Hiring and spending on new buildings and land acquisition remained at strong levels, a good sign of confidence in economic prospects.”

Labor quality is the top issue facing small business owners with 89% trying to hire reporting difficulty finding qualified applicants, according to a separate report last week. Profit trends declined 1 point to a net negative 4% reporting quarter-on-quarter profit improvements, one of the best readings in survey history, the NFIB said.

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