WASHINGTON, D.C. — The National Federation of Independent Business (NFIB) reports that its Index of Small Business Optimism lost 1.2 points in March, falling to 86.8.
“The March reading is very low and headed in the wrong direction," says Bill Dunkelberg, NFIB's chief economist. "Something isn't sitting well with small-business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy."
The index has posted readings below 90 for 18 consecutive months, NFIB says, an unprecedented run in its 35-year history. However, NFIB's measurement of employment per firm reached 0.0 in March, the first time since July 2008 that employment hasn't decreased.
"This sets the stage for job creation — if owners become optimistic enough to think that new hires can generate enough additional business to pay their way," Dunkelberg says.
Employers' plans to add new jobs remain weak. Over the next three months, 7% of survey respondents plan to reduce employment (down 1% from the prior month), and 15% plan to create new jobs (up 2%); 9% reported they had unfilled job openings.
Capital expenditures remained near record lows, with 45% of small businesses buying. Among those spending, 30% bought new equipment (down 1% from February), 16% purchased vehicles (down 3%), and 8% percent improved or expanded facilities (down 2%).
Those reporting plans to make capital expenditures in the next few months fell 1% to 19%, 3% above a 35-year low reached in December 2009. And NFIB says that more business owners do not expect an improvement in business conditions over the next six months than expect one — a pessimistic reading of net -8%.
“With all the good news about the economy and GDP growth, it is not immediately obvious why owners remain so pessimistic and unwilling to commit to new spending," Dunkelberg says.
Part of the reason may be difficulty arranging credit, NFIB says. While 89% of operators report that their credit needs are being met or they have no plans to borrow, 15% more say that loans are harder to get today.
“What small businesses need most are increased sales, giving them a reason to hire and make capital expenditures, and borrow to support those activities," Dunkelberg says.