The National Federation of Independent Business “Index of Small Business Optimism” dropped a percentage point to 88.2 in July, marking one of the longest runs of negative returns since the index started keeping track of small business owner confidence in the early 1970s.
Weaker than normal plans for capital spending accounted for half of the decrease, as well as lower earnings, inventories and job openings predicted for the near term.
Plans to invest in capital expenditures dropped from 26 percent of all respondents to 21 percent. Just 6 percent of all participating owners felt now is a good time to increase operations compared to 4 percent in June and 14 percent in September 2007.
Over the past few months, only 7 percent of construction firms increased inventories while 24 percent reported reductions. Only 4 percent plan increases in the third quarter compared to 19 percent that plan inventory reductions. Still, more owners in the construction industry plan to expand employment (19 percent) than plan reductions (12 percent). Thirteen percent reported cutting average selling prices, but 48 percent reported price hikes in spite of overall weakness in construction activities. Inflation (on the input or cost side) was the No. 1 problem facing construction firm owners. Even with the price hikes, 45 percent of the owners reported lower earnings, quarter over quarter, compared to 18 percent reporting gains, according to the report.
By comparison, in 1986 NFIB’s Index of Small Business Optimism reported optimism levels at 100 percent.
