Confidence among small U.S. businesses fell to an eight-month low in May, damped by a deteriorating outlook for sales and hiring, a private survey showed.
The National Federation of Independent Business’s optimism index decreased to 90.9, the lowest since September, from 91.2 the prior month, the Washington-based group said today in a statement. Six of the measure’s 10 components dropped.
Twenty-five percent of small-business owners cited weak sales as their top problem, one reason why they are reluctant to hire and invest. A measure of net price increases posted a fourth consecutive gain as business owners passed along raw- material costs to customers.
“The most apparent reason for the weak optimism is the weak recovery,” William Dunkelberg, the group’s chief economist, said in a statement. “The key is the consumer,” he said. “When sales pick up, owners will have a reason to hire more workers to take care of customers and to produce more output.”
A gauge of whether business owners expected higher sales fell 2 points to 3 percent, the lowest level since October. A measure of whether small firms plan to create new jobs fell 3 points to a net minus 1 percent last month, while a gauge of hard-to-fill openings dropped 2 points to a net 12 percent.
At the same time, more small-business owners said that expect business conditions will improve six months from now.
How Measured
The NFIB survey’s net figures are calculated by subtracting the percent of company leaders giving a negative answer from those with a positive response and adjusting the results for seasonal variations.
A measure of whether small firms think this is a good time to expand rose 1 point to a net 5 percent, while a gauge of capital outlays fell 1 point to 20 percent. A gauge of companies planning to increase inventories fell 2 points to a net minus 3 percent.
An index of earnings trends increased by 2 points to a net minus 24 percent.
“Large firms may be posting great profits, but the trend on Main Street is still not supportive of solid hiring and capital spending,” said Dunkelberg.
A net 15 percent of small businesses reported raising average selling prices in May. It was the fourth consecutive positive monthly reading after 25 months of decreases. Plans to increase prices fell one point to 23 percent, the second only to April as the highest reading in 31 months.
The NFIB report was based on 733 small-business owners surveyed through May 30. Small businesses represent more than 99 percent of all employers and have created 65 percent of new jobs in the past 17 years, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise employing up to 500 people.
To contact the report on this story: Bob Willis in Washington bwillis@bloomberg.net
