Small-Business Confidence Sees Modest Gain: The Start of a Trend, or a Blip?

Author: Cynthia Magnuson Date: October 11, 2011

Kevan Chapman 202-314-2041 (media)
Jennifer Cooper 202-406-4425 (media)
Holly Wade 202-314-2022 (research)

WASHINGTON, October 11, 2011 – Small-business optimism gained 0.8 points in September, according to the National Federation of Independent Business’ (NFIB’s) latest Index, ending a six-month decline. However, NFIB’s chief economist cautions that in spite of this uptick, there is little among the 10 Index components that can be considered “positive.” Reports of owners expecting real sales to improve were higher than last month, but were still negative. Similarly, owners expecting better business conditions in six months increased modestly, but this reading also remained negative.

Optimism index components were up slightly in September“An increase in consumer spending would be the best imaginable stimulus right now, not gimmicky Washington policies,” said NFIB Chief Economist Bill Dunkelberg. “Promising temporary tax cuts financed by permanent income tax increases will not help many small-business owners who pay taxes based on personal—not corporate—tax rates. The key to economic recovery is restoring the confidence of consumers; only then will small businesses begin to see the sales they need to expand. If consumers fear the path we are on, then ‘less is more’ policies that reduce the size of government will increase confidence.”

Twenty-eight percent of small-business owners reported that poor sales is still their top business problem. In fact, poor sales has been the top business problem for small-business owners for the past three years. The net percent of owners expecting better business conditions in six months was a negative 22 percent, up 4 points from August, but 32 percentage points lower than January. Not seasonally adjusted, 38 percent expect deterioration and only 9 percent expect improvement. 

Other highlights of September’s Optimism Index include: 
 Optimism Index ends 6-month slide

  • The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past three months lost 1 percentage point, falling to a net negative 10 percent, with more firms reported sales trending down than those who report sales trending up. While still negative, this is one of the best readings in over 40 months. Unadjusted, 25 percent of all owners reported higher sales (down 2 points) while 29 percent reported lower sales (up 1 point).
  • The future for small-business sales also remains weak. The net percent of owners expecting higher real sales gained 6 points from August to a net negative 6 percent of all owners (seasonally adjusted), but still 19 points below January’s reading. Over the next three months, 22 percent of owners (not seasonally adjusted) expect improvement (up 1 point) and 36 percent expect declines (up 2 points). Based on these numbers, it would appear that owners have lost confidence in the economy and perhaps even in the government’s ability to assist in the recovery.
  • In September, the employment picture remained bleak. Fourteen percent (seasonally adjusted) reported unfilled job openings, down 1 point from August. Over the next three months, 11 percent plan to increase employment (unchanged), and 12 percent plan to reduce their workforce (unchanged), yielding a seasonally adjusted 4 percent of owners planning to create new jobs, also down 1 point from August. To provide some historical context: in a typical expansion, this Index component usually has double digit readings.
  • According to September’s data, fewer owners are investing in their businesses. Essentially, owners are “on hold” as weak sales continue to depress the small-business economy. Over the past six months, the frequency of reported capital outlays fell 2 points—with 50 percent of all firms making such expenditures—a level where it has stalled for several years. Of those making expenditures, 35 percent reported spending on new equipment (down 1 point), 17 percent acquired vehicles (down 3 points), and 13 percent improved or expanded facilities (unchanged). Six percent acquired new buildings or land for expansion (up 1 point) and 9 percent spent money for new fixtures and furniture (down 1 point). The percent of owners planning capital outlays in the next three to six months fell 1 point to 20 percent, a recession level reading that has typified the recovery to date.
  • Access to credit continues to be a problem that plagues few of those surveyed; only four percent reported financing as their No. 1 business problem. Ninety-two percent reported that all their credit needs were met or that they were not interested in borrowing, while only eight percent reported that not all of their credit needs were satisfied. Fifty-one percent of those surveyed said they did not want a loan. A net 10 percent reported loans “harder to get” compared to their last attempt (asked of regular borrowers only), down 3 points. The weak recovery provides little incentive to borrow to support expansion or buy new equipment, even if interest rates are low.

Today’s report is based on the responses of 729 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of September. Download the complete study at


NFIB’s Small Business Economic Trends is a monthly survey of small-business owners’ plans and opinions. Decision makers at the federal, state and local levels actively monitor these reports, ensuring that the voice of small business is heard. The NFIB Research Foundation conducts some of the most comprehensive research of small-business issues in the nation. The National Federation of Independent Business is the nation’s leading small-business association. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals.

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