Small Business Optimism Index Remains Stagnant

Press Release

House Small Business Committee Chairman Sam Graves (R-MO) today issued the following statement on the January NFIB Small Business Optimism Index. The monthly Small-Business Optimism Index experienced a small increase, of .1 point, although it remains below its level a year ago of 94.1 which means that no progress was made in 2011.

"Although it is encouraging to see the monthly unemployment rate slowly improve, today's NFIB Optimism Report is another sign that small businesses are still uncertain about the economy and their company's growth outlook. This report underscores the caution of many economists who point to the outrageously high underemployment rate and the fact that much of the recent decline in the jobless numbers can be attributed to the drop in labor force participation, currently at an historic 63.7 percent.

"The net percent of small business owners expecting better business conditions in six months was a negative 3 percent, 13 percentage points below last year's reading. These numbers aren't just statistics -- they represent real businesses who want to grow and create jobs and real people who desperately need more opportunities for work. Washington could address this by ending any threats of tax hikes, passing a budget that addresses our debt crisis, and pulling back on the amount of unnecessary federal regulations. House Republicans have done this by sending more than 30 bipartisan jobs bills to the Senate, where 27 of them still await consideration. It is time for Senate Majority Leader Harry Reid to act."

Highlights of The January NFIB Optimism Index Report:

* NFIB reports of job growth improved (0.15) from December, but only to net zero (0) new workers per firm. The Bureau of Labor Statistics (BLS) report issued on February 3rd showed relatively strong job creation for January; NFIB's data suggest that there will be some downward revision in BLS numbers, especially in light of the adjustments in the Household Survey that suggested a huge number of adults left the labor force. Seasonally adjusted, 11 percent of owners added an average of three workers per firm over the past few months, while 11 percent reduced employment an average of 2.9 workers per firm. The remaining 78 percent of owners made no net change in employment.

* The frequency of firms that reported making capital expenditures over the past six months lost one point, declining to 55 percent, but still retaining the solid gain posted in December. The record low of 44 percent was reached most recently in August 2010. Of those making expenditures, 38 percent reported spending on new equipment (down 4 points), 20 percent acquired vehicles (unchanged), and 13 percent improved or expanded facilities (unchanged). Six percent acquired new buildings or land for expansion (up 1 point) and 11 percent spent money for new fixtures and furniture (down 2 points). While the spending picture has improved, it still falls short of "normal".

* The net percent of owners expecting better business conditions in six months was a negative 3 percent, 5 points better than December but still 13 percentage points below last year's reading. Not seasonally adjusted, 18 percent expect deterioration (down 4 points), and 22 percent expect improvement (up 7 points). A net 10 percent of all owners expect improved real sales volumes, up 1 point and the strongest reading since the beginning of the year. Twenty-two percent report "poor sales" as their top business problem, down 1 point, but still the top business problem reported.

* Increasing 3 points over December, a net negative 7 percent of all owners (seasonally adjusted) reported growth in their inventories. January marks 56 consecutive months during which reported inventory reductions have outnumbered reported increases. Unadjusted, 11 percent reported growth in inventory stocks (unchanged) and 22 percent reported inventory reductions (up 1 point). More owners reported weaker sales quarter on quarter than improvements, so demand can be met by reducing inventories on hand.

* Eighteen percent of the NFIB owners reported raising their average selling prices in the past three months (up 1 point), and 17 percent reported price reductions (down 1 point). Seasonally adjusted, the net percent raising selling prices was -1 percent, down a point from December. The frequency of price increases was highly concentrated in the Wholesale (a net 14 percent raised prices) and Retail (net 4 percent raised). Those cutting prices exceeded those raising prices by 14 percentage points in Construction and Agriculture, largely a result of seasonal impact. Twenty-three (23) percent of owners plan to raise average prices in the next few months, while 3 percent plan reductions. Seasonally adjusted, a net 17 percent plan price hikes up 3 points. With some evidence that spending has picked up, some of these price hikes might stick.

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