California’s Small Businesses Still Gloomy on Economy : Survey: One-third expect worse conditions in next three to six months. Confidence in Clinton’s policies is slipping.

California small businesses remain particularly gloomy about economic conditions, with only 6% considering this a good time to expand their businesses and nearly one-third expecting overall business conditions to worsen over the next three to six months, according to survey results released Monday.

Meanwhile, confidence in President Clinton’s economic policies is slipping among small businesses nationwide, and entrepreneurs’ increasing anxiety may hinder the national economic recovery, says the report by the National Federation of Independent Business.

In a July random-sample survey of 2,219 firms across the nation, only 4% characterized the President’s economic plan as good or excellent and 57% said it was poor.

“Business has little confidence that the President’s economic policies will help the economy,” the report says. “Interest rates are low enough. The problem is lack of confidence in future improvement.”

The Small Business Optimism Index, which reflects attitudes of small-business owners on general business conditions, fell for the second consecutive quarter. The index dropped from a seasonally adjusted 97 points in April to 94 last month, the lowest mark since the final quarter of 1990. When Clinton took office, the figure was over 100.

The drop in confidence reflects entrepreneurs’ increasing weariness with frail economic conditions, as well as dissatisfaction with the Clinton plan, said William Dennis, a senior fellow at the federation.

Small business owners “clearly don’t believe that the policy prescriptions that have been offered are the proper ones,” Dennis said.

Of the almost 800 California firms that participated in the national survey, 32% said they expect conditions to worsen in the coming months, up from 23% who responded similarly in the previous quarter’s survey. In Southern California, the majority of small business respondents continued to report slipping sales.

“The stubborn recession in California continues to take its toll,” said Wells Fargo Economist Joseph A. Wahed, who directed the California component of the survey. “Despite some improvement since April, small-business hiring and expansion plans remain muted--especially in Southern California.”

There were hopeful signs, however. The index of California optimism declined 4% last quarter, slightly less than the 5% slip nationwide. Twenty-one percent of Northern California small businesses reported increases in employment during the last quarter, up from 11% in the previous period. And, though only a minority of California entrepreneurs said they believe overall business conditions will improve soon, many said they believe their own business will pick up.

Most of the firms belonging to the federation have fewer than 100 employees. The bulk are engaged in retailing, service, construction or manufacturing.