U.S. Small Businesses not so Confident in Economy

However, hiring will improve over next year

Declining from last quarter, the U.S. Small Business Confidence Index (SBCI) dropped to 43 during the third quarter of 2007.

Businesses in the Northeast, Midwest and the South -- the same regions that provided the foundation for optimism in the first half of the year when the SBCI rose from 41 to 46 -- were the same regions that contributed to the third quarter decline, said the Small Business Research Board (SBRB) which produces the index. Each of those regions reported decreased confidence indexes signifying their concern about prospects for improvements in their business during the next 12 months, according to the report co-sponsored by International Profit Associates (IPA).

The south saw the largest decrease to 44 from 50 last quarter. Only the western states reported an improvement from last year.

The overall prospects for revenue increases for the next 12 months also contributed to the lower SBCI with 53% of the participants acknowledging they believe their sales will grow, a decrease of the 58% who said the same the previous quarter. Business in the South and West showed the greatest concern.

One improvement in the nationwide study is in hiring where 39% of the participants said they expect employment to increase during the next 12 months. This 2% increase from the summer 2007 poll was mostly supported by businesses in the western states where 45% believe they will add to their staff levels (up from 29%) and in the Midwestern states where 38% will boost employment (up from 36%).

"Only increases in hiring plans in each of the three reporting periods have buoyed the SBRB Small Business Confidence Index. Significantly, it might portend that businesses have had to and will increase hiring even though revenue is flat just to offset productivity decreases. As a result, the real crunch will be on operational efficiency," said Gregg M. Steinberg, president of IPA.

Sources: IndustryWeek staff, Agence France-Presse

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