No new customers for small businesses, survey says

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SBAOptimism among small-business owners improved marginally in January, with most saying lack of customers is keeping them from hiring or expanding their business, according to a survey released Tuesday.

“The weak state of small business confidence remains a roadblock to faster recovery,” wrote John Ryding and Conrad DeQuadros of RDQ Economics.

The index of small business optimism rose to 89.3 in January from 88.0 in December, the National Federation of Independent Business said, based on 2,114 responses to its survey. The index has been below 90 for seven straight quarters, a level it never breached during the 1991 or 2001 recessions. The index is typically above 100.

“Optimism has clearly stalled in spite of the improvements in the economy in the second half of 2009,”said William Dunkelberg, chief economist for the lobbying organization. “Small-business owners entered 2010 the same way they left 2009 — depressed.”

A net 1 percent of firms expected business conditions to improve in the next six months, down from 2 percent in December.

Companies were cutting jobs, wages and prices. Most said sales and profits were still falling. Credit remained tight, but most firms didn’t want to borrow any money.

The pessimism in the small-business sector stands in contrast to more hopeful signals elsewhere. “Relative to the surge in the Institute for Supply Management’s manufacturing index, this indicator remains decidedly lackluster,” wrote economists for Goldman Sachs. The ISM index rose to a five-year high of 58.4 percent in January.

“Larger companies are doing much better than smaller ones, which are much more reliant on domestic spending and bank credit,” wrote Ian Shepherdson, chief domestic economist for High Frequency Economics, who argues that the problems of small businesses aren’t being reflected in the government surveys on employment, capital spending and sales.

The outlook for jobs remained weak, according to the NFIB survey. “There is no need to hire with no new customers,” Dunkelberg said. In January, 9 percent of owners said they had hired workers, while 19 percent said they’d reduced their staff. Over the next three months, a net negative 1 percent of firms planned to hire.

Capital spending improved slightly in January from December’s record low. In January, 47 percent of all firms reported some capital spending over the past six months. Looking ahead, 20 percent planned to make some capital expenditure in the next few months, just 4 percentage points above the record low.


(c) 2010, MarketWatch.com Inc. Source: McClatchy-Tribune Information Services
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