President Barack Obama's re-election hopes took a hit Tuesday from an economic index that showed continued unease by America's small-business owners.
Along with the latest unemployment rate, which declined slightly in December, the "Optimism Index" of the National Federation of Independent Business bumped up 1.8 points. But the outlook for growth remains cloudy at best.
Much of Decembers gain resulted from the fact that concerns about business conditions over the next six months have subsided and because many small-business owners have improved their expectations for real sales gains in the coming months, said NFIB Chief Economist Bill Dunkelberg.
But make no mistake: the economic winter is still here. Similar gains in the early part of 2011 quickly faded, and the Index is still well below where it should be at this point in the recovery."
Dunkelberg concluded, "It is unlikely that growth will be much better than 2011, even with a solid fourth quarter GDP growth. There is still a lot of work to be done.
While the index gained 5.7 points over the last four months, the total reading of 93.8 points is still in recession territory. The index is still 6 points below the prerecession average and more than 10 points below the same point in the recovery from the 2001 recession.
The gains in the index support the view that economic growth will pick up in 2012, but nothing dramatic, said analysts, noting that the current level is consistent with weak growth.
Other highlights of Decembers Optimism Index -- based on responses of 725 randomly sampled small businesses in NFIBs membership -- include:
- Reports of positive earnings trends were 6 points better in December at a net negative 22 percent of all owners. Not seasonally adjusted, 16 percent reported profits higher (up 2 points), and 37 percent reported profits falling (down 3 points). "Still, profits showed a dismal performance historically," Dunkelberg said.
- In the past three months, 45 percent of owners hired or tried to hire, but 34 percent of them reported few or no qualified applicants. NFIB forecast models indicate that the unemployment rate will drift into the mid-to-low 8 percent range in 2012.
- Sales remain a problem for many small businesses. The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past three months gained 4 points, rising to a net negative 7 percent, which means that there are still more firms with sales trending down than those who are seeing their sales trend upward.
- In spite of reports of improving retail sales in the fourth quarter of 2011, 23 percent of owners reported weak sales as their top business problem.
- The frequency of reported capital outlays over the past six months rose 3 points to 56 percent, the third monthly increase in succession after vacillating between 44 percent and 52 percent since December 2008.
Overall, the spending picture has improved, but still far short of normal, Dunkelberg said.
The percentage of owners planning capital outlays in the next three to six months held at 24 percent, the highest reading in 40 months, also reached in March and November of 2011.
Read the full report here.
Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
