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Small Business Optimism Drops for Sixth Consecutive Month

Latest News > Industry News

September 20 — Confidence among small business owners declined sharply in August, making it the sixth consecutive monthly decline, as measured by the National Federation of Independent Business (NFIB) Small Business Optimism Index.

The Index fell by 1.8 points in August to 88.1, which followed a 0.9-point drop in July. The Index has declined 6 percentage points since it's high of 94.1 in January, falling to the same level as July 2010. The Index peaked at 98.9 in January 2007.

For the Index to be at its current level after more than two years into what is officially termed an economic expansion suggests that small business has largely been left out of any growth in the economy, says NFIB.

Weaker expectations for real sales growth and improved business conditions were the major contributors to the decline for the second month in a row.

NFIB Chief Economist Bill Dunkelberg attributed much of the August drop in the Index to the national debt ceiling debate and last minute resolution.

"The tumultuous debate over the nation's debt ceiling and a dramatic 11th hour ‘rescue' by lawmakers did nothing to improve the outlook of job-makers. In fact, hope for improvement in the economy faded even further throughout the month, proving that short-term fixes will not help," he said.

Several Index components that improved—plans to increase employment, plans to make capital outlays, current inventory—did little to buffer the fall.

Private-sector decision makers tend to think longer term, Dunkelberg pointed out. Until there is more clarity or certainty about the federal government's economic policy, there is little likelihood that the small business sector will substantially increase business investment or employment.

Read the NFIB news release.

Download the full report.