NFIB Small Business Optimism Index Fell In January

Date: February 13, 2015

January Reading Drops To 97.9 After Reaching Highest Level In More Than Eight Years In December

After reaching 100.4 in December, its highest level since October 2006, the
NFIB’s small business optimism index unexpectedly fell to 97.9 in January.
Analysts had predicted the index would increase slightly to 101.0 in January.
NFIB said the current index indicates that the small business sector is functioning
in a “normal” zone.

The biggest
factor impacting the January reading was the subindex of expectations for
business conditions over the next six months, which dropped 12 percentage
points to 0 percent. Expectations for real sales declined 4 points to 16
percent and the earnings trends subindex was down 4 points to -19 percent.

NFIB attributed
the decline in optimism to a realization by small business owners that
Republican gains in the mid-term elections did not signal a wave of small
business-friendly policies from the Obama Administration. NFIB chief economist
Bill Dunkelberg said in a statement, “As the reality that President Obama still
holds a lot of power sank in, perhaps small business owners’ attitudes fell
back a bit,” adding, “That’s one way to explain the swings in these numbers in
recent months.”

Meanwhile, job
growth continues to be positive. NFIB reported last week that in the three
month period which ended in January, small businesses added an average of 0.16
employees per firm. This follows December’s reading of 0.20. NFIB noted that
both the December and January readings are “historically very high numbers.”

What This Means For Small Business:

While the decline is of some concern, the fact that the confidence among small
business owners remains fairly high is a sign that they are finally shaking off
the impact of the Great Recession. Going forward, however, small business is
still going to need assistance in getting access to capital, relief from the
heavy hand of government regulation, and a path forward in dealing with
Obamacare.

Additonal Reading:

The Wall
Street Journal

reports on the NFIB survey in its “Real Time Economics” blog, as do Investing, Fox
Business
, Bloomberg
News
, and Money News.

The NFIB Research Foundation collects Small Business Economic Trends data with quarterly
surveys on the second Tuesday of each month. Read the Full January 2015 Report.

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