Rising sales expectations and declining concerns about future business conditions contributed to a more hopeful outlook among small-business owners in December, according to a survey from the National Federation of Independent Business (NFIB).
The NFIB’s Small Business Optimism Index edged up 1.8 points in December to 93.8. It was the fourth straight month the index registered an increase.
The optimism index has now gained 5.7 points over the last four months. However, it still remains in “recession territory” and is 6 points below its pre-recession average, the NFIB notes.
December’s optimism increase comes as owners expect higher sales during the next three months. The seasonally adjusted net percentage of owners expecting increased sales during the next 90 days rose 5 points from November to 9 percent.
Business owners also dialed back their pessimism regarding future business conditions. The seasonally adjusted net percentage of owners forecasting better business conditions in six months rose four points to negative 8 percent.
Although better than November’s result, it is still negative, indicating more business owners expect worse conditions than expect better conditions. The NFIB calculates net percentages by subtracting the percentage of negative survey answers it receives from the percentage of positive responses.
Earnings were another driving force behind the rising optimism index. The seasonally adjusted net percentage of owners reporting higher earnings in the last three months compared to the prior three months rose six points to negative 22 percent.
New York director’s comments
December’s Small Business Optimism Index is a step in the right direction, according to NFIB New York State Director Mike Durant. But the improving results are not reflective of a rapid change in outlook among business owners, he says.
“It’s a good thing that we see some positive optimism within the business community,” Durant says. “But they’re waiting for the other shoe to drop, too, because they’ve done this before.”
The optimism-index results, which are national, reflect feedback Durant is hearing in New York state, he says.
“I think cautious optimism is what I continue to hear at the state level,” he says. “I hesitate to say there’s some momentum.”
A year after enacting a property-tax cap, New York state government will continue to have a major role in conditions for small businesses, according to Durant. Mandate relief will be important, he says.
“I look at last year as this flashy year where you put the pieces on the board,” he says. “This year we have to deal with mandate relief both for municipalities and school groups, but also for businesses, too. These aren’t splashy items, but these are items I argue will go even further toward creating jobs.”
Other survey findings
Poor sales continued to be the top problem cited by small-business owners. In December, 23 percent of survey respondents listed poor sales as their single most important problem.
However, more owners reported higher sales in December. The seasonally adjusted net percentage of owners reporting higher sales over the past three months compared to the prior three months jumped 4 points to negative 7 percent.
The seasonally adjusted net percentage of owners planning to add jobs in the next three months dipped 1 point from November to 6 percent. Over the next three months, nine percent of employers plan to increase employment, a decrease of 2 percent from November, while 8 percent expect to reduce their workforce, a dip of 3 points.
The seasonally adjusted percentage of owners planning capital expenditures in the next three to six months remained unchanged from November at 24 percent. But 56 percent of survey respondents reported making capital outlays within the previous six months, a 3-point increase from November.
The NFIB is a small-business association with members in Washington, D.C. and all 50 state capitals. It randomly surveyed 725 of its members in December to calculate the optimism index.