New Year but Little Cheer: Small Business Owner Confidence Remains Low

It was tough for small businesses in 2012, but it would seem that many entrepreneurs think this year is unlikely to be much better.

Two major small business confidence surveys – the National Federation of Independent Business (NFIB) Small Business Optimism Index and the Wells Fargo/Gallup Small Business Index – plunged late last year and the latest NFIB poll shows only weak signs of recovery.

Small business owner confidence edged up in January but remains low, according to the NFIB. It stood at 88.9, up 0.9 on the previous month, having nosedived to 87.5 in November, following the re-election of Obama. It would seem the President has his work cut out reassuring entrepreneurs.

Many small businesses were spooked by the “fiscal cliff” scare last year. But although it was averted in an eleventh-hour deal, entrepreneurs remain uncertain about prospects this year.

The outlook for many small businesses is slightly down, surveys show. Sales trends are negative, with more small business owners reporting declining sales over the past three months than increasing sales, the NFIB poll reveals. Nearly a third of owners expect sales to decline over the next three months, but almost as many – 25% – expect them to rise.

Just a small number are hiring new staff. Of those surveyed, 11% said they had employed new staff in recent months, while 9% had reduced their headcount. On the positive side, the overwhelming majority –80% — made no net change in their workforce. That’s much better than if most were reducing headcount.

More small business owners said they were reducing their inventory than were adding to it, showing that demand is still suffering, as consumer spending remains weak. Capital spending was up slightly but nowhere near levels seen in previous recoveries, the NFIB commented.

Confidence in the future remains at historic lows. The net percentage of owners expecting better business conditions in six months’ time was -30% — five points better than in December, but still the fourth lowest reading in nearly 40 years, the NFIB said. It’s been a tough climb out of this recession for everyone, and small businesses haven’t been spared.

Tell us whether this is the picture you’re seeing? Are you pessimistic or optimistic about the future prospects for your small business? What positive signs are you seeing so far this year? We’d like to hear from you.