Feb 12, 2019

Main Street pares back its economic outlook

Data: National Federation of Independent Business; Chart: Andrew Witherspoon/Axios

Small business optimism dropped for the fifth straight month in January, according to closely-watched survey data by the right-leaning National Federation of Independent Business.

Why it matters: In lieu of economic data delayed by the shutdown, economists are paying closer attention to sentiment surveys which have increasingly been pointing to serious concerns about what's ahead for the economy.

While the overall small business optimism index has dropped off since the 2016 election, it still remains within range of historic highs.

  • Yes, but: "Half of the weakness came from softer expectations for real sales growth and business conditions in the second half of the year," the organization said in a press release.
  • Expectations for the economy to improve dropped by 10 points, while expectations for real sales to increase fell by 7 points and plans to increase employment declined 4 points.


  • Only 20% of small business owners said the next 3 months would be a good time for business expansion. That number has been declining since August's read of 34%. Those who said it wasn't a good time to expand business cited economic conditions, while those who were uncertain about expansion plans blamed the "political climate."
  • Not as many businesses are planning long-term projects and spending. The number of owners who planned capital expenditures within the next few months remained essentially flat at 26%, after falling 4 points in December.
  • Fewer owners are expecting higher sales in the next 3 months. The number has fallen consecutively since September, but remains above pre-election levels.

Still, the percentage of owners who reported paying workers higher wages is just one point below the record high seen in September.

  • Firms are hiring, though the number of business owners said finding quality workers was their "single most important business problem" remains near a record high.
  • Respondents also said borrowing conditions remained easy.

The big picture: The NFIB survey follows the weakest University of Michigan consumer sentiment index in more than 2 years. Last month's Conference Board Consumer Confidence Index showed consumers' future expectations for the economy had the largest 3-month decline in 7 years.

Go deeper: America's economic data divergence isn't going away

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