Small Business Index in U.S. Little Changed From Three-Year Low

Confidence among U.S. small businesses was little changed in December from an almost three-year low as owners waited for a decision on fiscal policy, a survey found.

The National Federation of Independent Business’s optimism index improved 0.5 point to 88 from 87.5 in November, the lowest reading since March 2010. Six of the measure’s 10 components rose and one was unchanged, the Washington-based group said.

Lingering negotiations among lawmakers about how to avert automatic tax increases and spending cuts that would have taken effect Jan. 1 probably weighed on small-business owners through year-end. The deal reached by President Barack Obama and Congress may have since eased firms’ concerns.

“Congress diddled right up to the end of the year, so there was no new information about the future of the economy, other than rising concerns that nothing would be done,” William Dunkelberg, the group’s chief economist, said in a statement. “Having some certainty about tax rates and some ‘tax extenders’ will provide some relief to owners, but doesn’t guarantee a more positive forecast for the economy.”

The NFIB report was based on a survey of 648 small-business owners through Dec. 28. Congress passed a bipartisan agreement on Jan. 1 making permanent the George W. Bush-era income tax cuts for 99 percent of Americans while letting them end for top earners. The agreement left undetermined what to do about automatic government-spending cuts and raising the debt ceiling.

Last month’s improvement in the small-business index compares with a 5.6-point November plunge as owners grew increasingly concerned that the economy would slump.

Biggest Gains

The two components with the biggest gains in December were the sales outlook measure and the earnings gauge, which each advanced three points, today’s report showed.

The net share of businesses projecting improved economic conditions six months from now was unchanged at minus 35 percent, the lowest since monthly records began in 1999, today’s report showed.

The three components showing a drop were led by a four-point decline, to a net 1 percent, in the reading of those planning to add jobs. Indices measuring hard-to-fill openings and expectations for easier credit conditions also fell.

Payrolls rose by 155,000 workers in December following a revised 161,000 advance in November that was more than initially estimated, Labor Department figures showed last week. The unemployment rate held at 7.8 percent, matching the lowest since December 2008.

Survey Calculations

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 gauge’s reading of 88 compares to a low of 81 in March 2009, according to NFIB monthly data going back to 1986. The index peaked at 107.7 in November 2004.

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.

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