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Small Business Optimism Index

Justin Voccola/MEDILL

Fewer small business owners said they planned to hire more employees last month.

Small business optimism declines in September due to political uncertainty

by Justin Voccola
Oct 09, 2012

Optimism among small business owners declined slightly in September from a month earlier, according to a report released Tuesday by National Federation of Independent Business.

The group’s optimism index declined 0.1 percent to 92.8 from 92.9. The decline was attributed to negative responses about the labor market, capital expenditures and sales. Small business owners were particularly bleak about hiring over the next three months: 4 percent said they would hire more employees compared with 10 percent who said that a month ago.

“Small businesses are clearly concerned with the outcome of the presidential election as it will have a tangible impact on tax rates and regulations that will influence hiring,” said Holly Wade, senior political analyst and deputy chief economist at the federation.

Small business owners were also less willing to invest in their operations, according to the report. The percent of owners planning capital outlays in the next three to six months fell 3 percent compared with August.

A candy store in downtown Chicago is a one example. “The economy cannot support me reinvesting in my business because there isn’t strong enough demand for my candy,” said Gail Goodman, owner of Confection Connection Too.

When Goodman first opened her store in the Monadnock building, she believed working professionals in the area would become great customers. But sales at her store have not been what she expected this fall and she is not optimistic about a short-term turnaround.

“The summer months are always a challenge for my business. However, the holiday season compensates for it, but I am not off to a good start and do not anticipate a turnaround,” Goodman said.

Small business owners surveyed by the federation reported their sales have declined 17 percent since April and were unchanged during the month of September.

The report surveyed 691 small businesses that are members of the small business group. The September change was within the sampling error of between 2 percent and 3.5 percent. The index uses 1986 when the economy was expanding as a baseline of 100. Since 2009, the reading has been below 93 more than 30 times.