In terms of economic performance, it’s been a rough start to the year. The tenuous fiscal cliff debate spilled into 2013 and the sequestration has sent several government agencies into crisis mode. However, such problems haven’t put a damper on small business confidence, according to a recent index release from the National Federation of Independent Businesses (NFIB).
Majority of index components show gains
The NFIB Small Business Optimism Index rose 1.9 points during February to reach 90.8, continuing a recovery from the November index reading that plummeted 5.6 points to 87.5, a level comparable with the July 2009 index during the height of the recession.
Overall, of the 10 components that make up the survey, eight grew month-over-month, one fell, and one remained unchanged.
The biggest gains in small business confidence were in plans to increase inventory and plans to make capital outlays, rising 6 points and 4 points month-over-month, respectively.
The other index factors showing growth from January indicated more small business owners planned to increase employment, thought the economy would improve, expected better credit conditions, predicted real sales would be higher in February, and listed more current job openings.
Fewer entrepreneurs thought it was a good time to expand in February, compared to the month before; the earnings trend indicator did not change.
Yet, despite the responses indicating an overall trend toward higher confidence in small business conditions during February, NFIB economic analysts said the story behind the index painted a less rosy picture.
“While the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed,” said Bill Dunkelberg, NFIB chief economist. “Washington is manufacturing one crisis after another,” he added, noting that, “Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship … The Index gained almost two points last month; that was good news. But, until owners’ forecast for the economy improves substantially, there will be little boost to hiring and spending from the small-business half of the economy.”
In his comments, Dunkelberg did note the labor market improved enough to make February a, “decent month for a change,” especially in regard to the growth in private sector hiring.
Entrepreneurs who are buoyed by this increasingly optimistic sentiment and are planning to make capital outlays should first consider their financial position. If in need of financing, National Funding can assist with a small business loan to help cover expenses while owners make necessary investments in their enterprise.