Small Business Owners Still Mired in Recession Mentality

The National Federation of Independent Businesses (NFIB) Index of Small Business Optimism indicates that the recession is still going strong. According to September’s report, small business owners have been pessimistic since January 2008, when the index dropped below 93.

The report examined various factors, including employment, capital spending, sales, earnings, and credit. In most areas, statistics showed minimal upward change. Business owners are clearly suffering because of consumers’ low spending power.

Small business’ employment statistics reflect the current high rate of unemployment. Average employment growth was negative. In addition, 16% of respondents reported plans to reduce their work forces.

In the capital spending arena, the picture is not much rosier. In fact, the frequency of spending on improvements like new equipment and facility expansion is only one point above the 35-year record low. Apparently, business owners don’t feel their businesses are successful enough to justify major investments.

Sales have not fared well either. 34% of small business owners reported reduced sales in the past three months. Many described liquidating inventory, while lacking reason to order new stock.

Inflation has been affecting small businesses, according to the report. There is cost-cutting across the board, creating reduced profits. Profits, vital to expansion, have not been strong. 33% of owners reported that they have increased profits. That number represents a 3 point decrease in business owners reporting profit.

One bright spot in all the gloom is credit. 91% of small business owners are satisfied with the level of credit they receive. While interest rates are low, borrowing is down, because without expansion and capital spending, businesses do not need large influxes of cash.

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