The National Federation of Independent Business Index of Small Business Optimism tumbled in September from 105.3 to 103 led by a steep drop in sales expectations, not just in hurricane-affected states, but across the country.
“The temptation is to blame the decline on the hurricanes in Texas and Florida, but that is not consistent with our data,” said Juanita Duggan, NFIB president and CEO. “Small business owners across the country were measurably less enthusiastic last month.”
The number of small business owners who expected better sales plunged a net 12 points last month. Owners who think that it’s a good time to expand dropped a net 10 points. Also within the Index, expected better business conditions (-6) and capital expenditure plans (-5) retreated in September.
“The drop-off was consistent around the country regardless of region, and it’s likely that members in Florida and Texas were underrepresented in this survey because of the obvious disruptions,” said NFIB Chief Economist Bill Dunkelberg. “The adjusted average employment change per firm dipped to -0.17, which is a significant drop in hiring activity.”
State-specific data is unavailable, but NFIB State Director Dawn Starns said small business owners here are anxious about congressional action on issues such as health care and taxes. “Owners aren’t sure how everything is going to play out, so there’s a lot of uncertainty.”
Dunkelberg agreed. “The Index remains very high by historical standards,” he said. “Small business owners still expect policy changes from Washington on health care and taxes, and while they don’t know what those changes will look like, they expect them to be an improvement. But the frothy expectations they’ve had in the previous few months clearly slipped in September.”
Six of the 10 Index components dropped in September. Three improved, and one remained unchanged. The bright spot last month was inventory plans, which gained five points as more business owners anticipate a strong 4th quarter.