Small business optimism dips, report says

After slow but steady improvement over the first half of this year, small business optimism soured considerably in June, according to a July 10 report by IHS Global Insight. Small business owners became more downbeat on almost everything in the month, but particularly, their outlook on the economy and earnings potential worsened significantly.

It appears small businesses are trying to make do with their current resources, the report said. They have run down inventories to better meet their lowered sales expectations; the net percentage of owners reporting stocks too low was unchanged in the month. Additionally, small businesses are asking more out of their existing employees or hiring temporary workers. The net percentage of respondents planning to increase their full-time work force fell to 3 points -- its lowest level since October.

“It is clear from this report that small business owners are not expecting to do much additional capital spending, hiring or expanding in the next three months,” said IHS senior economist Leslie Levesque, who provided the analysis. “A more positive outlook on credit conditions does not mean much in this type of environment. Small businesses will not increase spending or their labor force until they see demand pick up, feel less uncertain on policy issues and do not feel so over-regulated." 

Some other highlights from the NFIS Small Business Optimism Index:

• The National Federation of Independent Business (NFIB) Small Business Optimism Index fell 3 points to 91.4 in June.

• This was the steepest decline since June 2010, erasing all gains posted this year. The index is now at its lowest level since October 2011.

• Just one of the index’s 10 categories improved: expected credit conditions.

• Much of the increased pessimism amongst small business owners in June stemmed from expectations of the economy and earnings trends.