Small Business Optimism Falls in July

Washington, DC, Aug. 9, 2011 -- For the fifth consecutive month, the National Federation of Independent Business's Small-Business Optimism Index fell, dropping 0.9 points in July.

The decline was larger than in each of the previous three months, NFIB said.

The reading of 89.9 is below the average reading of 90.2 for the last two-year recovery period.

Expectations for future real sales growth and improved business conditions were the major contributors to the decline in optimism.

“Given the current political climate, the protracted debate over how to handle the nation’s debt and spending, and the now this latest development of the debt downgrade, expectations for growth are low and uncertainty is great,” said NFIB Chief Economist Bill Dunkelberg.

“At the two year anniversary of the expansion, the index is only 3.4 points higher than it was in July 2009. And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the ‘Small-Business Pessimism Index’ from now on.”

The percent of owners citing poor sales as their top problem—the long-time primary complaint of firms—has faded a few points, and reports of sales trends are much better than a few months ago.

However, the July survey anticipates slow growth for the remainder of the year, high unemployment rates, inflation rates that are too high and little progress on job creation.