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Small Businesses Still 'Stuck in a Rut'

Oct. 14, 2014
Unease about the economy has small businesses pulling back on plans for capital spending and hiring.

The September Small Business Optimism Index fell 0.8 points to 95.3 as small business owners continued to be cautious about growth prospects for the global economy. Only a net 5% of owners said they expect real sales volumes to increase.

Plans to increase capital spending took the biggest hit in the monthly index, conducted by the National Federation of Independent Business, falling 5% to a net 22% of reporting companies. Manufacturers make up about 15% of the respondents in the survey.

The fact that capital spending plans have fallen back to their previous low in 2014 “shows that small businesses remain uncertain about the global outlook,” said Thomas Feltmate, an economist at TD Economics. He said that concern was reinforced by a slight dip in the “expect real sales higher” component of the index.

NFIB reported the net percent of owners planning to increase employment fell 1 percentage point to a seasonally adjusted 9%, which followed a 3 point drop in August.

Small business owners’ unease about the economy was evident in their reduction in inventories. A net minus 7% of owners reported growth in inventories. “Clearly firms are liquidating stocks faster than adding to them,” NFIB noted. “With sales trends weakening, the reductions in inventories are not surprising.”

In its survey report, NFIB also noted the weak demand by small businesses for credit, despite low interest rates.

“Borrowed money must be repaid with interest and few business owners see opportunities to make profitable investments in facilities, equipment or employees,” the report asserted. “There is too much uncertainty, expectations for improved sales are weak, the economy is not expected to improve substantially and there is little hope that the top concerns of business owners will be addressed in Washington, D.C.”

“Overall, small business owners are still stuck in a rut that has been difficult to escape,” said Bill Dunkelberg, NFIB’s chief economist.

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