The fiscal cliff cast a dark shadow over small-business owners in December. Confidence failed to rebound from November’s historic low reading, according to the latest National Federation of Independent Business Optimism Index.
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Optimism gained 0.5 points, however the recession-level reading of 88 is still the second-lowest number since March of 2010. The NFIB credits the number to a deterioration of labor market components and the high number of businesses that believe business conditions will worsen in the next six months.
Seventy percent of businesses surveyed said now is a bad time to expand, while 25% said political uncertainty is their top reason, thanks to the fiscal cliff. The top two business problems are taxes (23%) and regulations (21%) followed closely by poor sales (19%).
One bright spot was sales, which edged up slightly. The net percent of all businesses (seasonally adjusted) reporting higher nominal sales over the past three months grew five points, to a -10%.
However, consumer spending still remains weak. The net percent of owners expecting higher real sales volumes rose three points to -2%, seasonally adjusted. This is still 14 points below the 2012 high of net 12% in February. Forty percent (non-seasonally adjusted) of businesses believe sales will decline in the next three months, down three points from November.
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Job creation was essentially flat in December, with 11% of firms reporting hiring an average of 2.9 workers per firm in the past few months. Thirteen percent reduced employment, however, about 1.9 workers per firm. The remaining 76% had no change in employment. Forty-one percent of businesses attempted hiring in the past three months and 33% said there were few or no qualified applicants.
Job creation plans for the future fell, however, indicating that only a net one percent of owners plan to hire over the next few months.
Credit markets were a non-issue for businesses once again, with 52% explicitly saying they did not want a loan, and only one percent reported financing as a top business problem, which is tied for the worst rating in survey history.
Finally, capital spending remains at historically-low levels, and plans to make capital outlays also remain in recession territory. Only 8% said now is a good time to expand, up two points, but the net percent of business owners expecting better business conditions in six months was a net -35%. This is unchanged from a sharp decline in November.