Small Business Confidence Dwindles
Confidence among small U.S. businesses fell slightly in December as owners remain cautious about their prospects and uncertain about the country’s economy.
February 4 2011 by Fayazuddin A. Shirazi
Optimism at some of the nation’s leading small and independent businesses recorded a decline in December after a steady rise over the last five months. At least two surveys have indicated to this effect. However, a couple of other surveys reveal a contrary picture depicting an increase in business confidence among small business owners. Likewise, small businesses in Canada are upbeat about the economic prospects in their country in contravention to the majority sentiment among their counterparts in U.S.
According to the NFIB Small business confidence survey, the optimism index decreased to 92.6 from November’s 93.2 reading that was the highest since the recession began in December 2007, the Washington-based group said in a recent media release. Interestingly, the decline comes after small business confidence touched its highest level in almost three years in November 2010.
NFIB data indicated that while weak sales remains the top problem, stagnating hiring and spending on capital projects also were slated to be the bothering issues. All of which are sidelining the small business sector from a recovery, the survey said. This marks the 36th month of Index readings in the recession level.
“The hope for a pickup in the small business sector did not materialize,” William Dunkelberg, the group’s chief economist, said in a statement. “Owners remain stubbornly cautious and uncertain about the future course of the economy and their business prospects.”
Discover’s Small Business Watch survey for December also depicted similar sentiment with majority of the survey respondents thinking, a sustained rebound will take time to develop. The monthly index dropped to 81.6 in December, down 5.6 points from November. The index remains 4.6 points higher than one year ago.
According to the Discover survey 25 percent of small business owners said the economy was getting better this month, down from 33 percent in November; 51 percent said it was getting worse, up from 46 percent; and 22 percent said the economy was staying the same, up from 17 percent the prior month.
“Through the four years we’ve been studying them, small business owners have remained a bit fickle when it comes to their confidence in the economy,” said Ryan Scully, director of Discover’s business card, a division of NY based financial services company offering business credit card for American small businesses.
The survey is conducted by Rasmussen Reports in partnership with Discover and Small Businesss Watch, based on a national random survey of 750 small business owners.
Meantime, in contrast to the decline in small business confidence in U.S., the CFIB (Canadian Federation of Independent Business) has recorded an increase in small business owner’s confidence levels. Its index stood at 69.3, considered to be the highest in nine months this year.
The recently released CFIB data said that its “business barometer” hit 69.3 in December, up more than five points from November and close to the post-recession high hit in March last year.
CFIB chief economist Ted Mallett believed factors other than the Christmas retail rush were responsible for the increased small-business sentiment as the year 2010 came to an end.
“Instead, a large improvement in optimism among manufacturers, natural resource businesses, financial services and personal services firms pushed the overall index upward,” he said in a statement.
Similarly another small business survey by Vistage International, a San Diego, Calif., based CEO network, serving 14,000 members across 15 countries, found that small business CEOs expressed a remarkable resurgence of optimism both in the overall economy and for their own companies.
Its confidence measuring mechanism, the Vistage Confidence Index jumped to 106.3 in the 4th Quarter of 2010, after reporting 95.1 in the 3rd quarter, 94.4 in the 2nd quarter and 93.7 in the 1st quarter of this year. Of the 1,729 respondents in the Q4 Vistage CEO Confidence Index, 77 percent expect increased revenues and 63% foresee higher profits in their own companies.
“Nearly half the CEOs surveyed pledged their personal assets to keep their companies running, their people employed, and our economy from collapsing. They are the unsung heroes of our economic recovery and the brighter days ahead,” Rafael Pastor, CEO and Chairman Vistage International said in a recent media release.