Small Business Optimism Index Falls For Fifth Consecutive Month

Statement

House Small Business Committee Chairman Sam Graves (R-MO) today issued the following statement on the July NFIB Small Business Optimism Index. For the fifth consecutive month, NFIB's monthly Index fell, dropping 0.9 points in July--a larger decline than in each of the previous three months--and bringing the Index down to a disappointing 89.9:

"July's NFIB Optimism Index shows that small business confidence is in a dangerous free fall after five consecutive months of decline. Even though reports of sales trends are better than a few months ago, the Index continues to fall, which proves that small business uncertainty about the regulatory, tax, and spending environment in Washington is becoming more discouraging.

"Between the regulatory requirements, nervousness about future tax burdens, unsustainable government spending, and the cloud of massive debt that is weighing on the economy, you can see why small businesses are expressing this kind of pessimism and despair.

"What Washington needs to do is provide certainty for small businesses by reducing burdensome regulations, reforming our tax code, quickly passing free trade agreements, and addressing our out-of-control federal debt.

"Small companies employ more than half of all workers, and more than 99 percent of businesses with payrolls in this country are small firms. Entrepreneurship and small business growth is the solution to the most significant problem that our economy is facing -- unemployment. However, Washington must help provide an environment for this type of growth and then get out of the way so that the private sector can thrive."

Highlights of The July NFIB Optimism Index Report:
* While the national unemployment rate dipped marginally, for the nation's small businesses, the employment story is not a positive one. Twelve percent (seasonally adjusted) reported unfilled job openings, down 3 points. Over the next three months, 10 percent plan to increase employment (down 1 point), and 11 percent plan to reduce their workforce (up 4 points), yielding a seasonally adjusted 2 percent of owners planning to create new jobs, 1 point lower than June, leaving the prospect for job creation bleak.

* The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past 3 months lost 1 percentage point, falling to a net negative 8 percent. Currently, there are more firms with sales trending down than there are with sales trending up, however, this indicator is the third best reading in 42 months. The unadjusted numbers are: 29 percent of all owners reported higher sales (last three months compared to prior three months, up 2 points) while 28 percent reported lower sales (down 3 points).

* Reports of positive earnings trends were unchanged at a net negative 24 percent of all owners, while not high, is the best reading in 43 months. Not seasonally adjusted, 20 percent reported profits higher (up 2 points), and 38 percent reported profits falling (down 3 points). Corporate profits are at a record high level as a share of GDP, but these increased have not translated to Main Street, where even among the most optimistic of sectors, small manufacturing firms, only 23 percent reported higher earnings while 37 percent reported lower profits (not seasonally adjusted).

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