US small businesses are losing confidence in recovery

10 April 2012 18:48  [Source: ICIS news]

WASHINGTON (ICIS)--US small business owners are losing confidence in the nation’s recovery and worry that 2012 could mimic their experience in 2011 when a strong first quarter was followed by months of decline, a leading trade group said on Tuesday.

The National Federation of Independent Business (NFIB) said that its monthly survey of member firms showed a 2-point decline last month in owners’ confidence about the near-term course of the US economy, the first drop in six months.

NFIB chief economist Bill Dunkelberg said that nine of the 10 survey components that make up the group’s “small business optimism index” declined in March, “most notably in hiring plans and expected real sales growth”.

A loss of confidence among US small business owners is considered a critical signal for the nation’s employment picture because small manufacturers and commercial operations account for the vast bulk of new hiring.

“The decline in the percent of owners planning to increase the number of workers indicates growing weakness in the job market and portends a rising unemployment rate,” Dunkelberg said.

In addition to downturns in small business owners’ expectations for hiring and sales, the survey also reported declines in their plans to make capital investments and increase inventories.

The owners also said they expect a decline in earnings trends and worsening credit conditions. The survey results showed that 93% of those responding think that now is a bad time to expand operations.

“The mood of owners is subdued,” said Dunkelberg, “they just can’t seem to shake off the uncertainties out there”.

He said that survey respondents also are losing confidence in the ability of Washington policymakers to deal effectively with the still wobbly economy.

Dunkelberg said that owners are worried that the small business economic pattern seen in 2011 will repeat this year. Although the first quarter of 2011 showed promise, the next two quarters were disappointing.

“What we saw in March is painfully familiar,” he said. “This was the same pattern of growth followed by months of decline from 2011.”

“History appears to be repeating itself – but not in a good way,” he said.

Dunkelberg said that small business owners remain worried about Europe, “as if waiting for another shoe to drop” in the euro zone sovereign debt crisis. 

He also cited continuing poor numbers for US consumer confidence and spending, both of which could be further eroded by rising US gasoline prices and other fuel costs.

Among the “single most important problem” reported by survey respondents, ranking highest were taxes, poor sales and government regulations and red tape.

The NFIB represents some 350,000 US small businesses across the country.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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