Small Business Owners Expect Better Conditions Over Next Six Months

Examining Barrel In Distillery

BATON ROUGE (May 12, 2020) — The National Federation of Independent Business said that small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months. The Optimism Index has fallen 13.6 points over the last two months, with nine of 10 Index components declining in April and one improving.

“The impact from this pandemic, including government stay-at-home orders and mandated non-essential business closures, has had a devastating impact on the small business economy,” said NFIB Chief Economist William Dunkelberg. “Owners are starting to benefit from the PPP and EIDL small business loan programs as they try to reopen and keep employees on staff. Small business owners need more flexibility, though, in using the PPP loan to support business operations and liability protection so that all these efforts to support small businesses are not ultimately lost in costly litigation.”

State-specific data is not available, but NFIB State Director Dawn Starns said, “The shutdown helped slow the spread of the coronavirus, but it took a tremendous toll on small businesses. Our members are hopeful that the worst is behind us and are eager to continue the process of safely reopening.” 

NFIB said real sales expectations in the next six months declined 30 points to a net negative 42 percent, the lowest reading in the survey’s 46-year history. The second-lowest reading was net negative 24 percent in April 1980. A net negative 11 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 19 points from March.  

The NFIB Uncertainty Index fell 17 points in March to 75, with most owners “quite certain” that the economy will weaken in the near-term. However, reports of expected better business conditions in the next six months increased 24 points, rebounding from a 17-point decline in March. Owners’ optimism about future conditions indicates they expect the recession to be short-lived. 

Other key findings from April’s Optimism Index included: 

  • Earnings trends declined 14 points to a net negative 20 percent. Among owners reporting weaker profits, 39 percent blamed weak sales, 16 percent blamed usual seasonal change, six percent cited price changes, four percent cited labor costs, and two percent cited materials costs. For owners reporting higher profits, 63 percent credited sales volumes and 17 percent credited usual seasonal change. 
  • The percent of owners thinking it’s a good time to expand lost 10 points falling to three percent, its lowest level since March 2010. 

As reported in last week’s NFIB’s monthly jobs report, job creation plans fell eight points to a net one percent, the lowest level since December 2012. Three times as many owners reduced employment as reported an increase in their workforce. Forty-seven percent reported hiring or trying to hire (down seven points), but 41 percent (87 percent of those hiring or trying to hire) reported few or no “qualified” applicants for the positions they were trying to fill. Twenty-four percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 11 points. 

“The full force of the “recession” has not yet been felt as programs such as PPP encourage firms to maintain employment even as the government shutdown reduces business activity,” Dunkelberg said. “A large percentage of the unemployed expect to be rehired as the economy opens back up, but the picture is further confused by unemployment benefits that for many exceed previous pay. Small business owners are starting to rehire laid-off employees as states lift business restrictions and small business loans are hitting bank accounts.” 

Click here to view the NFIB Small Business Economic Trends Survey

 

Categories: Alerts, COVID-19, Today’s Business News

Comments

comments