US Small-Business Optimism Deteriorates Further

US Small-Business Optimism Deteriorates Further

Thursday, January 14,2010 04:51 AM

Small-business owners grew even more pessimistic in the final month of 2009, capping off what was a trying year for their businesses.

The Small Business Optimism Index decreased 0.3 point to 88.0 last month from November, reported the National Federation of Independent Business in a press release Tuesday.

The NFIB noted that the index has been below 90 for 15 months, a sign of the severity of the current economic downturn. The index is seven points higher than the survey's second-lowest reading, reached in March. The lowest reading was 80.1, hit in 1980.

Last year "was a very difficult year for small business," said NFIB chief economist William Dunkelberg. "Continued weak sales and threatening domestic policies from Washington have left small-business owners with little to be optimistic about in the coming year."

The subindex covering sales expectations increased 1 percentage point, but remained negative at -1%. The index for better earnings remained unchanged at -43% in December, and the capital outlays index rose by 2 points to 18%.

The index measuring plans to increase inventories fell five points to -8% and the job creation index rose 1 point to -2%. "While the trend for increased employment is going in the right direction," said Dunkelberg, "there is no indication that job growth will be strong enough to dramatically reduce the unemployment rate," he said.

The report also indicated that inflationary pressures were still tame, with the weak economy still putting downward pressure on prices. The report showed that 10 percent of the owners reported raising average selling prices, but 33% reported price reductions yielding a net-negative 22%, seasonally adjusted, of owners who cut prices in December.

Regular borrowers--those accessing capital markets at least once a quarter--also continued to report difficulties in arranging credit at the highest frequency since 1983, according to the report. A net 15% reported that loans were harder to get than during their previous attempt, a number that was unchanged from November.

Read the (free) wsj.com article here: http://online.wsj.com/article/SB10001424052748704586504574654242915231088.html?mod=WSJ_Small+Business_LEFTTopStories