NFIB Index Shows Small Business Optimism Down

Date: February 09, 2016

Declines In Optimism Driven By Uncertain Economy, Sales; Hiring Maintains Momentum

According to the NFIB’s latest Small Business Economic Trends report, optimism among small business owners declined in January, falling further below the 42-year historical average. The Small Business Optimism Index fell 1.3 points in January to 93.9, below the average of 98. Reuters reported that January’s results were the weakest since February 2014. However, results weren’t lowered due to pessimism about the labor market, but rather by small business owners’ thoughts on general business conditions over the next six months as well as their expectations for sales. Such lowering of general economic and sales expectations is similar to other weak economic reports from manufacturing, consumer confidence, and trade, Reuters pointed out. This led businesses to keep holding back on boosting their inventories, instead offering discounted prices to clear out warehouse stock. CNBC reported that small businesses do not appear to be “scaling back on hiring and continue to report a shortage of qualified workers to fill job vacancies.” This is leading them to begin “raising wages to attract and retain workers,” with the number of small business owners reporting increases to compensation in January rising to the “highest level since 2007.”

What This Means For Small Businesses

NFIB Chief Economist William Dunkelberg said of the current economic situation, “The Small Business Optimism Index fell a bit more than one point, not much of a response to stock market turbulence or the Federal Reserve’s move to raise interest rates. The decline in optimism was accounted for by two important Index components, expected business conditions in six months and expected real sales.” He cautioned that “overall, it is unlikely that anything will occur that will raise the spirits of small business owners.”

Additional Reading

NASDAQ, Monitor Daily, and Market Watch also covered the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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