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NFIB Small Business Report, January 2010

The National Federation of Independent Business Research Foundation has collected small business economic trends data since 1973. The following excerpt is used by permission of the above from their latest survey, January 2010. Copyright of the NFIB Research Foundation. Chief economist William C. Dunkelberg and policy analyst Holly Wade are responsible for the report, based on a survey of small and independent business owners.
http://www.nfib.com

"For small business owners, 2009 ended with a thud. The Optimism Index fell and finished just seven points ahead of March which was the second lowest reading in 35 years of survey history, even through the economy posted positive growth in the second half of the year.

Interest rates are at historically low levels, inflation virtually non-existent and real hourly earnings have held up well. In the first quarter of 1980, the Index reached 100 and then went on to top 107, the record high reading a few quarters later, a huge surge after a tough recession. But now the Index is 12 points below 100 and has been below 90 for nearly two years.

So why hasn't owner optimism soared like it usually does at the end of a recession, especially one that cut so deeply into our economic fabric? The answer is "hope and change". There is little hope and the change that is being delivered is far from encouraging. Washington is offering nothing but higher taxes and fines and fees and more regulation. Congress is passing bills with thousands of pages of hidden bombs that will go off as the legislation is passed and implemented. Federal spending has soared amazingly, yet been ineffective except at pushing the federal deficit to incomprehensible heights, promising to double our national debt in just a few years. The interest burden this will place on average Americans is astounding. Uncertainty is the enemy of economic growth and investment, and Washington, D.C., the usual source of uncertainty, is delivering plenty of it. Confidence in our political leadership has tanked.

So we begin the year with capital spending and inventory investment plans in record low territory as well as job creation plans. More owners expect sales to fall than to increase in the first quarter, more have been cutting workers and worker compensation than increasing them and reports of actual spending on capital projects are at 35 year historic lows. Interest rates are at historic lows and we have more savings to lend out but few are willing to borrow and spend the funds.

Few view the current period as a good time to expand their business. Those cutting average selling prices outnumber those raising them by a 3-to-1 margin. Plenty of opportunity to spend, lots of potential pent up demand but the management team is not able to lead the economy out of its doldrums, instead choosing to erect barriers to future growth." 

Please consider the above link for the complete report, including many color charts and statistics, which inquiring minds will want to read.  

Disclosure: "No Position".