Entrepreneurial

Small business confidence taking a beating

December 9, 2009

All those pundits who declared the current recession dead and buried, obviously haven’t been talking to small business owners.

Chapman University economists are the latest to announce the official end of the recession – with the codicil that the recovery will be more tortoise than hare.

In stark contrast to that report is the latest National Federation of Independent Business survey that shows small business confidence is locked in a downward spiral, that is worse than at any time during the last big recession in 1981-82.

The NFIB index showed a drop of 0.8 points in November – to 88.3 – from where it was in October and it represented the sixth time the index was below 90 since the current recession officially began 24 months ago. According to the NFIB, the index never fell below 90 at any point during the 1981-82 downturn and experienced a sharp rise at the beginning of 1983.

NFIB chief economist William Dunkelberg said the index’s current level was directly related to a lack of consumer spending. It seems not even a modest increase in Black Friday sales volume was enough to boost morale among small business owners.

“The biggest problem continues to be a shortage of customers,” Dunkelberg said in a statement. Among the 825 respondents to the NFIB survey, just 16 percent said they planned to make any capital expenditures over the next few months – the lowest total in 35 years. “Consumer spending is very weak, and there is nothing on the table in Washington to make owners more optimistic about the future.”

Dunkelberg said a continued lack of access to credit was further handcuffing small businesses and slowing job growth. In November small businesses reported a decline in average employment per firm of 0.58 workers during the prior three months, according to the NFIB. That represented a vast improvement over May’s record loss of 1.26 workers per firm, but not something that could lead someone to confidently proclaim the recession dead.

Despite Obama’s recent small business and job forums and yesterday’s announcement that he will meet yet again with banks to try to get credit lines flowing to small businesses as a way to stimulate job growth, Dunkelberg said more needs to be done to restore small businesses confidence.

“The economy may be turning, but small firms are not convinced things will improve anytime in the near future,” said Dunkelberg.

Comments
4 comments so far | RSS Comments RSS

The article misquotes Dunkelberg on the issue of lack of access to credit. He is of the opinion that weak credit demand born of low confidence, and not weak supply, is the reason for the dearth of lending to small enterprises.

Posted by Mega | Report as abusive
 

35 year eh? About as long as the Boomer’s have been booming/ busting and spending. Could we even dream to keep that kind of consumption growing without them? I think not!

Posted by Pixelink | Report as abusive
 

I have been in business over 25 years in the same location and business type. We have lived through some tuff times but this time it will more than likely force us to close. The credit crunch is killing the consumer and making them feel poorer than they are. we went from spending 6% more than we made to saving 4%, that 10% has decimated the retail sector and after January we will see many Out of Business signs.

Posted by Ati | Report as abusive
 

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