WASHINGTON (MNI) – The following is the text of the National
Federation of Independent Business’ monthly Small Business Optimism
index published Tuesday:

The National Federation of Independent Business (NFIB) Small
Business Optimism Index rose 0.3 in October to 93.1; the slight uptick
in the reading did not seem to indicate a dramatic shift in owner
sentiment over the course of the month. The survey, conducted before the
presidential election, found that the percent of owners uncertain about
whether business conditions will be better or worse in six months, was
at a record high (23 percent). This eclipsed the pre-recession record of
15 percent reached during the Carter Administration. NFIB’s forward
labor market indicators weakened last month, and owner views of the
future do not foresee much improvement in economic growth.

“While four of ten survey components rose, the Index still remains
in solidly pessimistic-and recessionary — territory,” said NFIB chief
economist William Dunkelberg. “In the 40 months since the alleged
‘recovery’ started in July 2009, the Index has never exceeded a reading
of 95; the pre-recession average for the Index is 100. The election is
over and Washington looks much like it did on November 5th. The fear of
stalemate among the small-business community is palpable, as the looming
fiscal cliff and the threat of higher costs and more taxes are very real
possibilities come January. Until then, not knowing the direction of the
economy will always have a dampening impact on spending and hiring.”

One indicator that rose slightly in October is the frequency of
reported capital outlays in the past six months, increasing 3 points to
54 percent. Similarly, the percent of owners planning capital outlays in
the next three to six months rose one point to 22 percent. These
positive changes, however, are unlikely a sign that capital spending
might return to levels more consistent with past recovery periods, as
only seven percent characterized the current period as a good time to
expand facilities. The net percent of owners expecting better business
conditions in six months was also unchanged at a net two percent.

Optimism Components : Net % Change

PLAN TO INCREASE EMPLOYMENT 4 0
PLAN TO INCREASE CAP. OUTLAYS 22 +1
PLAN TO INCREASE INVENTORIES -1 0
EXPECT ECONOMY TO IMPROVE 2 0
EXPECT REAL SALES HIGHER 3 +2
CURRENT INVENTORY SATISFACTION 0 +1
CURRENT JOB OPENINGS 16 -1
EXPECTED CREDIT CONDITIONS -8 -1
NOW A GOOD TIME TO EXPAND 7 0
EARNINGS TRENDS -26 +1

Some other highlights of October’s Optimism Index include:

Sales: Weak sales is still the reported No. 1 business problem for
22 percent of owners surveyed. The net percent of all owners (seasonally
adjusted) reporting higher nominal sales over the past three months is
negative 15 percent, 2 points worse than September, confirming the weak
growth in non-durable consumer spending in the third quarter. The five
year high of a net four percent was reached in April. Seasonally
unadjusted, 18 percent of all owners reported higher sales (last three
months compared to prior three months), down 5 points and 29 percent
reported lower sales, down 1 point. Consumer spending remains weak and
high energy costs diminish consumer disposable income. The net percent
of owners expecting higher real sales rose 2 points to three percent of
all owners (seasonally adjusted), down nine points from the year high of
net 12 percent in February. Not seasonally adjusted, 25 percent expect
improvement over the next three months (up 1 point) and 34 percent
expect declines (up 3 points).

Job Creation: October was another weak job creation month, though
better than September due primarily to a reduction in terminations which
will raise the net jobs number. According to the October survey, owners
stopped releasing workers; the average change in employment per firm
rose to just 0.02 workers-essentially zero. While this development ends
a four-month run of employment reductions (September’s number was a
seasonally adjusted -0.23), national employment is still 4 million lower
than it was in 2008 (first quarter). Seasonally adjusted, 11 percent of
the owners reported adding an average of 2.7 workers per firm over the
past few months, and 10 percent reduced employment an average of 2.9
workers. The remaining 79 percent of owners made no net change in
employment. Forty-eight (48) percent of the owners hired or tried to
hire in the last three months and 38 percent reported few or no
qualified applicants for open positions. The percent of owners reporting
hard to fill job openings fell one point to 16 percent of all owners,
the second monthly decline in a row. Twelve (12) percent have openings
for skilled workers, two percent for unskilled and three percent for
both. Job creation plans remained weak, with a net four percent planning
to increase employment, unchanged from September and 6 points below the
August reading. Not seasonally adjusted, 10 percent plan to increase
employment at their firm (unchanged), but 12 percent plan reductions (up
1 point).

Credit Markets: Access to credit continues to be low of the list of
small-business owner concerns. Twenty-eight (28) percent reported all
credit needs met, and 52 percent explicitly said they did not want a
loan (64 percent including those who did not answer the question,
presumably uninterested in borrowing as well). Eight percent of those
surveyed reported that all their credit needs were not met, and only
three percent reported that financing was their top business problem.
Thirty (30) percent of all owners reported borrowing on a regular basis,
down 1 point from September. A net seven percent reported loans “harder
to get” compared to their last attempt (asked of regular borrowers
only), which is up 1 point from September. Three percent of owners
reported higher interest rates on their most recent loan, while another
three percent reported getting a lower rate. The net percent of owners
expecting credit conditions to ease in the coming months was a
seasonally adjusted negative eight percent (more owners expect that it
will be “harder” to arrange financing than easier), down 1 point from
September.

Today’s report is based on the responses of 2,029 randomly sampled
small businesses in NFIB’s membership, surveyed throughout the month of
October.

** MNI Washington Bureau: 202-371-2121 **

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