Tuesday, May 10, 2011

NFIB: Small Business Optimism Index decreases in April

by Calculated Risk on 5/10/2011 07:30:00 AM

From National Federation of Independent Business (NFIB): Small-Business Optimism Index Dips for Second Consecutive Month in April

The Small Business Optimism Index fell 0.7 points in April to 91.2, not much but still a disappointing outcome following the March decline. After last month’s larger decline, this month is more akin to an “after shock”.
Thankfully, the labor market components did not decline further, although
net job creation weakened. Also, fewer reported adverse profit trends and
reports of positive sales trends were still less frequent than reports of
quarterly declines, but the best reading since December 2007, the peak of
the last expansion.
...
Twenty-five (25) percent of the owners reported that weak sales continued to be their top business problem
Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy.

Small Business Optimism Index Click on graph for larger image in graph gallery.

The first graph shows the small business optimism index since 1986. The index decreased to 91.2 in April from 91.9 in March.

This has been trending up, although optimism has declined for two consecutive months now.

Small Business Hiring PlansThis graph shows the net hiring plans for the next three months.

Hiring plans were unchanged in April. According to NFIB: “The outlook for future employment growth remains unchanged from March: Only 16 percent plan to increase employment, and 6 percent plan to reduce their workforce, yielding a seasonally adjusted net 2 percent of owners planning to create new jobs in the next three months."

Small Business Biggest ProblemWeak sales is still the top business problem with 25 percent of the owners reporting that weak sales continued to be their top business problem in April. In good times, owners usually report taxes and regulation as their biggest problems.

The recovery continues to be sluggish for this index, probably partially because of the high concentration of real estate related companies. Most of the decline was due to "soft" components, especially future expectations.