Small-business owner optimism declined in March as sales expectations and earnings came back to earth after a post-election surge.
The National Federation of Independent Business said its monthly sentiment gauge fell 0.6 point to 104.7, a slightly larger decline than the 0.5-point dip forecast by economists surveyed by Econoday.
The post-election surge was the biggest in the four decades NFIB has been conducting its survey. The gauge rose again in January but then receded in February.
In March, some warning signs appeared. The uncertainty index rose to 93, its second-highest reading on record. “More small business owners are having a difficult time anticipating the factors that affect their businesses, especially government policy,” noted Bill Dunkelberg, the groups’ chief economist.
But pessimism was widespread in March. Of 10 survey components, only three notched an increase.
Index component Seasonally adjusted level Change from last month Plans to increase employment 16% 1 Plans to make capital outlays 29% 3 Plans to increase inventories 2% -1 Expect economy to improve 46% -1 Expect real sales higher 18% -8 Current inventory -5% -3 Current job openings 30% -2 Expected credit conditions -3% 0 Now a good time to expand 22% 0 Earnings trend -9% -4
Among other things, owners say they’re still struggling to find qualified labor: 85% report few or no qualified applicants for open positions. More survey respondents said finding qualified workers was their single biggest business problem — more than those citing weak sales.
Small business may bear the brunt of this skills mismatch not just through higher wages, but also through having to invest in additional training, Dunkelberg noted.
The March survey was conducted before Congress’ failure to repeal and replace the Affordable Care Act, which has been one of NFIB’s biggest complaints since it was first implemented. Much of the post-election bounce in sentiment was due to expectations that Congress would reverse many of the policies small business has chafed against for years.
“Congress’s failure to keep its promises could dampen optimism, and that would ripple through the economy,” NFIB said in a release.
Still, the March data had some bright spots. Nearly one-third of owners said they plan to spend on capital expenditures, the highest reading of the recovery.
“Consumer confidence is hitting new high levels and small business owners have not given up hope that their optimism will be rewarded with performance,” Dunkelberg said.