Release Date: 12/ 01/ 2005
CONTACT: Michael Diegel or Melissa Sharp, (202) 554-9000
Energy costs driving pricing pressures; some measures drop into negative territory
COLUMBUS, Ohio -- The number of small-business owners who think business conditions are improving dropped into negative numbers this quarter for the first time this year, according to the latest Ohio Small-Business ConditionsSM report. The data, which was released today by the National Federation of Independent Business/Ohio, provides an overview of small-business conditions within Ohio and compares them with neighboring states.
A net 15 percent (percent positive minus percent negative) of small-business owners reported business conditions are “good,” down from a net 20 percent last quarter, while a negative 5 percent believe business conditions are “improving” compared to a net 2 percent the previous quarter. That is the first time this year that more believe conditions will deteriorate than believe they will improve. Ohio joins neighboring states Indiana (negative 4 percent), Michigan (negative 9 percent) and Pennsylvania (negative 1 percent) in the minus column.
When asked their single most important business problem, 19 percent reported it was inflation and rising prices, replacing “taxes” as the most important problem cited in the previous quarter. When asked which costs were rising most rapidly, 35 percent said “energy” and 28 percent cited “materials.” Twenty-nine percent said they coped with rising energy prices by reducing energy use, while 21 percent absorbed those costs with reduced earnings.
“Clearly, rising energy costs have been a concern this year, but now we are seeing clear evidence of the effect those high costs are having on small businesses,” said Ty Pine, NFIB/Ohio state director. “This does not bode well for business profits as we head into the winter.”
Energy costs also are reflected in purchasing prices. A net 62 percent of respondents said their purchasing prices increased since last quarter, up from a net 55 percent last quarter. Similar results were reported in Indiana (net 63 percent, up from net 55 percent), Michigan (net 67 percent, up from net 55 percent) and Pennsylvania (net 63 percent, up from net 59 percent). However, only Michigan respondents reported a significant change in the number who raised selling prices, a net 19 percent versus a net 10 percent last September.
The Small-Business ConditionsSM reports are developed from surveys of small-business owners in selected states. The surveys are designed to determine the condition of the small-business economy in each particular state. The surveys are conducted every three months and results are released on the first day of the month following completion.
| Ohio Small-Business ConditionsSM | ||||||
| This chart shows the results from Ohio and its comparative standing among selected states in the region. | ||||||
| Ohio | Ind. | Mich. | Pa. | |||
| Business Climate | Survey Date | |||||
| Overall state business environment | ||||||
| Net % supportive of small business | 11/2005 | 11 | 20 | 4 | 7 | |
| Prior qtr. | 11 | 28 | 8 | 10 | ||
| Business conditions in market area | ||||||
| Net % "good" | 11/2005 | 15 | 23 | -2 | 25 | |
| Prior qtr. | 20 | 29 | 2 | 30 | ||
| Net % "improving" | 11/2005 | -5 | -4 | -9 | -1 | |
| Prior qtr. | 2 | 9 | -5 | 1 | ||
| Outlook for business | ||||||
| Net % "good" in next three months | 11/2005 | 51 | 50 | 35 | 46 | |
| Prior qtr. | 49 | 56 | 40 | 52 | ||
| Reason for optimism | ||||||
| % Sales prospects | 11/2005 | 46 | 45 | 49 | 45 | |
| Prior qtr. | 50 | 45 | 42 | 41 | ||
| % Lower costs | 11/2005 | 4 | 4 | 4 | 5 | |
| Prior qtr. | 4 | 4 | 3 | 4 | ||
| % Price increases | 11/2005 | 1 | 3 | 2 | 6 | |
| Prior qtr. | 2 | 5 | 2 | 5 | ||
| % Greater productivity | 11/2005 | 13 | 17 | 13 | 11 | |
| Prior qtr. | 12 | 12 | 11 | 12 | ||
| % Government policy | 11/2005 | 4 | 4 | 2 | 5 | |
| Prior qtr. | 3 | 5 | 4 | 3 | ||
| % Seasonal/Weather | 11/2005 | 15 | 8 | 16 | 12 | |
| Prior qtr. | 8 | 8 | 10 | 9 | ||
| Reason for pessimism | ||||||
| % Sales prospects | 11/2005 | IC* | IC | IC | IC | |
| Prior qtr. | IC | IC | IC | IC | ||
| % Cost increases | 11/2005 | IC | IC | IC | IC | |
| Prior qtr. | IC | IC | IC | IC | ||
| % Pressure on selling prices | 11/2005 | IC | IC | IC | IC | |
| Prior qtr. | IC | IC | IC | IC | ||
| % Lower productivity | 11/2005 | IC | IC | IC | IC | |
| Prior qtr. | IC | IC | IC | IC | ||
| % Government policies | 11/2005 | IC | IC | IC | IC | |
| Prior qtr. | IC | IC | IC | IC | ||
| Ohio | Ind. | Mich. | Pa. | |||
| Sales and earnings (last quarter) | ||||||
| Sales | ||||||
| Net % sales "good" | 11/2005 | 37 | 33 | 20 | 37 | |
| Prior qtr. | 34 | 37 | 22 | 43 | ||
| Profits | ||||||
| Net % profits "good" | 11/2005 | 13 | 16 | 4 | 17 | |
| Prior qtr. | 13 | 14 | 0 | 22 | ||
| Employment | ||||||
| Current job openings (one or more) | ||||||
| % "Yes" | 11/2005 | 17 | 16 | 15 | 18 | |
| Prior qtr. | 17 | 19 | 17 | 21 | ||
| Per employee payroll cost | ||||||
| Net % "risen" | 11/2005 | 15 | 16 | 10 | 17 | |
| Prior qtr. | 12 | 12 | 8 | 21 | ||
| Employee cost pressures (greater) | ||||||
| % Wages | 11/2005 | 54 | 54 | 49 | 42 | |
| Prior qtr. | 50 | 57 | 50 | 44 | ||
| % Benefits | 11/2005 | 32 | 26 | 32 | 36 | |
| Prior qtr. | 33 | 26 | 31 | 36 | ||
| Ohio | Ind. | Mich. | Pa. | |||
| Productivity | ||||||
| Upgraded technology/processes (last three months) | ||||||
| % "Yes" | 11/2005 | 42 | 43 | 43 | 41 | |
| Prior qtr. | 40 | 41 | 38 | 38 | ||
| Made capital expenditure(s) (last three months) | ||||||
| % "Yes" | 11/2005 | 46 | 41 | 36 | 47 | |
| Prior qtr. | 40 | 42 | 35 | 38 | ||
| Made expenditure to train employee(s) (last three months) | ||||||
| % "Yes" | 11/2005 | 41 | 39 | 39 | 40 | |
| Prior qtr. | 39 | 39 | 36 | 38 | ||
| Capacity utilization - can increase sales 10% without new inputs | ||||||
| % "Yes" | 11/2005 | 55 | 57 | 52 | 52 | |
| Prior qtr. | 50 | 49 | 53 | 50 | ||
| Credit availability (last three months) | ||||||
| % All credit needs satisfied | 11/2005 | 39 | 34 | 39 | 37 | |
| Prior qtr. | 37 | 35 | 31 | 37 | ||
| % All credit needs not satisfied | 11/2005 | 6 | 7 | 10 | 8 | |
| Prior qtr. | 6 | 5 | 7 | 4 | ||
| % No credit needs | 11/2005 | 52 | 53 | 47 | 49 | |
| Prior qtr. | 51 | 53 | 55 | 52 | ||
| Ohio | Ind. | Mich. | Pa. | |||
| Prices | ||||||
| Purchasing prices (last three months) | ||||||
| Net % increased | 11/2005 | 62 | 63 | 67 | 63 | |
| Prior qtr. | 55 | 55 | 55 | 59 | ||
| Selling prices (last three months) | ||||||
| Net % increased | 11/2005 | 18 | 15 | 19 | 20 | |
| Prior qtr. | 16 | 16 | 10 | 18 | ||
| Miscellaneous | ||||||
| Involvement in start of another business | ||||||
| % "Yes" | 11/2005 | 13 | 9 | 12 | 7 | |
| Prior qtr. | 8 | 8 | 9 | 10 | ||
| Single most important business problem | ||||||
| % Weak sales | 11/2005 | 11 | 10 | 20 | 9 | |
| Prior qtr. | 13 | 11 | 17 | 9 | ||
| % Taxes | 11/2005 | 13 | 15 | 8 | 11 | |
| Prior qtr. | 18 | 15 | 11 | 15 | ||
| % Employee quality/costs | 11/2005 | 7 | 7 | 8 | 8 | |
| Prior qtr. | 8 | 9 | 7 | 7 | ||
| % Insurance | 11/2005 | 16 | 16 | 13 | 17 | |
| Prior qtr. | 13 | 16 | 17 | 18 | ||
| % Big-business competition | 11/2005 | 11 | 11 | 14 | 15 | |
| Prior qtr. | 14 | 13 | 11 | 14 | ||
| % Inflation/Rising prices | 11/2005 | 19 | 16 | 18 | 14 | |
| Prior qtr. | 12 | 13 | 14 | 13 | ||
| % Credit availability/Interest rates | 11/2005 | 3 | 3 | 3 | 3 | |
| Prior qtr. | 3 | 2 | 3 | 3 | ||
| % Regulations/Red tape | 11/2005 | 8 | 6 | 5 | 9 | |
| Prior qtr. | 8 | 6 | 5 | 7 | ||
* Insufficient cases
| Ohio Quarterly Spotlight | |
| Which of your total costs are rising most rapidly? | |
| Energy | 35% |
| Labor | 7% |
| Insurance | 21% |
| Materials | 28% |
| Some other | 2% |
| None rising rapidly | 2% |
| Don't know/Refused | 5% |
| Total | 100% |
| What is the single most important action you have recently taken to offset rising energy costs? | |
| Raised selling prices | 15% |
| Invested in energy-conserving equipment or vehicles | 8% |
| Reduced energy use | 29% |
| Absorbed costs with lower earnings | 21% |
| Reduced non-energy costs such as payroll | 10% |
| Other | 7% |
| Don't know/Refused | 11% |
| Total | 100% |
The Poll
NFIB’s Ohio Small-Business ConditionsSM is a telephone survey of a random sample of Ohio small employers regarding business conditions within the state. “Small employer” is defined here as employing between one and 250 people (not including the owner(s)) in a for-profit business. Each edition of the survey has a minimum of 350 respondents. The sampling error is ± 5 percentage points. Data are collected quarterly in the months of February, May, August and November, beginning in February 2005. The MRCGroup of Las Vegas conducts the survey for the NFIB Research Foundation.
The Sponsor
The NFIB Research Foundation is a 501 (c)(3) organization that provides policy-makers, media, educators, small-business owners and other interested parties empirically based information on small business and small-business owners. The Foundation is affiliated with the National Federation of Independent Business, the nation’s largest small- and independent-business advocacy organization, and is located in Washington, D.C.
