Small business owners’ confidence rises but remains low

Brian OliverSmith, chief executive of Urban Planet Mobile in Durham, N.C., said he was concerned about the effects of the deal in Congress to resolve the "fiscal cliff" would have on his small business payroll.
(Chuck Liddy / Raleigh News & Observer / MCT)

WASHINGTON -- Small business owners were more optimistic about their prospects in February, but their overall confidence in the economy remained low, according to a leading private barometer.

The Small Business Optimism Index from the National Federation of Independent Business rose to 90.8 in February, up 1.9 points from the previous month. Although the increase was positive, the group noted that reading was similar to the average from 2008, as the Great Recession was taking hold.


“The index gained almost 2 points last month; that was good news,” said NFIB chief economist Bill Dunkelberg. “But until owners’ forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy.”

Although Fortune 500 companies reported record 2011 earnings, small business earnings “remain depressed,” he said.

Sales have been weak and policy gridlock in Washington has added to the problems, Dunkelberg said.

Eight of 10 components of the index rose in February, led by a 4 percentage point rise -- to 25% -- in firms planning to increase capital spending and inventory investment during the next six months.

Still, just 4% of the 870 randomly sampled business owners said they planned to hire more workers in the next six months, up 1 percentage point from January. Five percent of business owners said this was not a good time to expand, down 1 percentage point.

The overall economic outlook of small business owners remained low.

The index for expectations that the economy would improve over the next six months was at negative 28% in February, slightly better than in January. That figure is derived by subtracting the percentage of respondents who think the will be worse from the percentage who think it will be better.


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