Confidence Among Small U.S. Companies Falls to Nine-Month Low

Confidence among U.S. small companies dropped in July to its lowest point in nine months as owners became more concerned about future earnings and sales.

The National Federation of Independent Business’ optimism index fell to 91.2 from 91.4 in June. Three of its 10 components contributed to the index’s third-straight decline, the Washington-based group said.

“We can expect very sluggish growth for the balance of the year,” William Dunkelberg, the group’s chief economist, said in a statement. “The job creation picture remains weak.”

The decline is sentiment may further slow the economic recovery as small companies cut back. Gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate in the second quarter as household purchases, which account or about 70 percent of GDP, grew at the slowest pace in a year.

A net minus 27 percent of businesses reported positive earnings trends, a decline of 5 points from June and the lowest level since November. A measure of whether business owners expected sales to improve dropped 1 point to minus 4 percent this month, the fifth consecutive decline.

The percent of owners reporting that it was hard to fill a job opening held at 15 percent after falling five points in June. Payrolls rose more than forecast in July even as the unemployment rate climbed to a five-month high, figures from the Labor Department showed this month.

Capital Spending

The share of company owners last month that said they would invest in new equipment was little changed, according to today’s report. A gauge of whether small firms thought inventories would increase fell 1 point to minus 1 percent.

The survey’s net figures are calculated by subtracting the percent of business owners giving a negative answer from those with a positive response and adjusting the results for seasonal variations.

The NFIB report was based on responses from 1,803 small- business owners through July 29. Small companies represent more than 99 percent of all U.S. employers, according to the U.S. Small Business Administration. A small business is defined as an independent enterprise with no more than 500 employees.

To contact the reporter on this story: Caroline Fairchild in Washington at cfairchild2@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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