Did you hear?...Small businesses regain optimism, but it’s not a recovery -- yet

Small businesses now say they are more optimistic about the economy but they aren’t ready to call it a recovery. See the data SNEWS gathered.
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From coast to coast, small businesses of all kinds have said for 18 months they are not necessarily thumbs-up about the future as are recent overall economic reports.

But all that changed in April, according to the most recent figures from the National Federation of Independent Small Business and its Index of Small Business Optimism. Still, the group isn’t ready to leap in the air and scream, “Recovery!”

For the first time since September 2008, the optimism rating climbed just over 90 to 90.6, jumping a resounding 3.8 points from the prior month’s rating in the monthly survey. The group (www.nfib.com) said the long string of optimism ratings in the 80s was “unprecedented” in the survey’s 24-year history.

“Pessimism persists but the Index is finally out of the 80s, at least for one month,” the group stated.

In March, the group still hovered in the mid-80s at 86.8, actually down 1.2 points from the previous month. The ratings in the 80s also were reported over the summer of 2008. They are based on 10 survey indicators, with ratings in 2005 and 2006 (see five-year chart, below) showing high confidence that shot the numbers over 100.

“The April Index ended seven straight quarters of under 90 readings -- a pyrrhic victory considering the mound of obstacles heading down Main Street from Washington, D.C.,” the group’s Small Business Economic Trends reported.

But although the trend is positive, the group points to continued issues that will affect small businesses: “While nine of the 10 Index components rose and one was unchanged from March, job creation and capital expenditure plans have not recovered,” the report stated. “These gains are not enough to establish that a solid recovery is underway.”

Some areas surveyed are: employment, capital spending, inventories and sales, inflation, profits and wages, and credit markets.

Summarized the report, “Assuming that the most recent recession bottomed in the third quarter of 2009, the Index has remained depressed and Gross Domestic Product (GDP) growth has averaged less than half of that experienced in the 1983 recovery period. Perhaps this weaker recovery is a result of the fact that small businesses are not participating.”

To read about the group’s take on economic trends for small businesses, click here.

--Therese Iknoian

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