Despite economic improvements seen throughout last year, a new report on small-business owner confidence revealed expectations for improved conditions remained low despite increasing in February from January levels.
According to the National Federation of Independent Business, the Small Business Optimism Index increased 0.9 points bringing it to a mark of 88.9. The low index level seen in the first month of the year was believed to have occurred because of uncertainty regarding the fiscal cliff which had yet to be determined. However, the lack of a major improvement indicates economic factors may still be of concern.
When looking at sales, trends were mostly negative for many small companies, with NFIB reporting the seasonally adjusted nominal sales increased 1 point in January leaving the index at a negative nine percent. In addition, 19 percent of owners said weak sales were their top issue regarding the success of their business. Nineteen percent posted higher sales while 32 percent said their sales were lower over the last three months.
Job creation did increase in January but not a significant amount to suggest overall improvements. Eleven percent of owners said they hired additional employees, matching the month before, while 9 percent reported having reduced employment. The majority, 80 percent of small business owners said they hadn’t had any notable alterations to their employment.
“The Optimism Index barely budged in January,” said Bill Dunkelberg, chief economist of NFIB. “The only good news is that is budged up, not down. If small businesses were publicly traded companies, the stock market would be in shambles. While corporate profits are at record levels as share of GDP, small businesses are still struggling to turn a profit.”
The economy did see many improvements, but with consumer sentiment still on lower side in index history, the positives have been weighed down. Dunkelberg noted that the economy contracted in the final quarter of the year, which likely resulted in sales slipping. Additionally, when small businesses are lacking profit, hiring becomes an issue. Other concerns regarding increased taxes and higher priced health insurance has likely kept small business owners from mirroring economic growth when it comes to optimism in the market.
Small business owners may be looking to cut costs in some departments, but insurance policies should be kept at levels appropriate for assets and risks associated. Trimming coverage to help offset rising expenses or the need to hire more employees could leave owners with out-of-pocket expenses should an accident or incident arise, resulting in an insurance claim that exceeds coverage limits.