Small Business Optimism Skids in July‎

By Matt Egan Features FOXBusiness

In another sign of the fragility of the economic recovery, a survey released on Tuesday revealed small business optimism slumped in July amid worries about economic prospects.

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The National Federation of Independent Business said its small business optimism index declined by 0.9 point, or 1%, to a reading of 88.1 in July. The group called the “persistence” of the sub-90 readings “unprecedented in survey history.”

NFIB said 90% of the decline in the monthly index can be chalked up to deterioration in the outlook for business conditions in the next six months.

“The performance of the economy is mediocre at best, given the extent of the decline over the past two years. Pent up demand should be immense but it is not triggering a rapid pickup in economic activity,” the report said.

Of the components that comprise the index, expectations for the economy to improve slid by nine points to -15%. Other components also fell, including plans to make capital outlays, plans to increase inventories, expected credit conditions, whether now is a good time to expand and the earnings trend.

The NFIB said the frequency of reported capital outlays over the past six months slid by one point to 45% of all firms, just one point above the 35-year record low hit most recently in December 2009.

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NFIB said 73% of those surveyed said the current period is not a good time to expand and 66% of those respondents cited the weak economy, compared with 18% who cited the “political climate.”

“Bottom line, owners remain pessimistic and nothing is happening in Washington to provide encouragement. Confidence is lost,” the report said.

The NFIB also weighed in on the inflation/deflation debate, saying inflation “is clearly not a problem” as more companies are still cutting prices rather than raising them.

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