Latest poll shows small business concern about economy's direction

March 12, 2014 

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Small-business confidence dropped to a 12-month low in February, reversing three months of consecutive gains and raising new uncertainty about the economy’s direction.

Winter’s continued onslaught crushed hiring plans but concerns about business conditions and unknowns in Washington related to health care and tax reform also were factors, according to the National Federation of Independent Business.

In a report Tuesday, the federation said its small-business optimism index dropped 2.7 points to 91.4, which economists said represented its lowest point since March 2013, when the index registered 89.5.

Facing continued questions about the health-care law, environmental regulations, the minimum wage and tax reform, it was no surprise small-business optimism fell, said Bill Dunkelberg, NFIB’s chief economist.

“Business owners aren’t going to bet their money on a future they cannot see clearly," Dunkelberg said.

Economists said pessimism was most evident in earnings trends, with a net 27 percent of firms reporting lower earnings.

Still, they saw encouragement in planned increases in capital outlays.

“Despite the disappointing headline, we are heartened by the increase in investment intentions,” said Sonny Scarfone, an analyst with TD Economics. “This gives hope that a little more sunshine and vitamin D will lift the spirits of small businesses in the months ahead.”

The NFIB said a review of the February indicators showed:

-- NFIB owners increased employment by an average of 0.11 workers per firm in February (seasonally adjusted), virtually unchanged from January. -- Twenty-two percent of all owners reported job openings they could not fill. Thirteen percent reported using temporary workers, down one point from January. -- The percent of owners planning capital outlays in the next three to six months rose 1 point to 25 percent.

-- Fifteen percent of the NFIB owners reported reducing their average selling prices in the past three months (up 2 points), and 19 percent reported price increases (up 2 points).

The NFIB report was based on the responses of 792 randomly sampled small businesses in NFIB’s membership surveyed throughout the month of February.

It is available at nfib.com/sbetindex.

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