U.S. Small Business Confidence Levels Fell in July

Clearly small businesses are in “survival mode,” using tactics like invoice factoring to stay in business and bolster cash. Yet as some small businesses are new to the idea of factoring, many have been employing it for years, helping them to meet bills, pay employees, purchase supplies, and to sustain growth. U.S. small business confidence levels fell in July to the lowest level in four months, according to the National Federation of Independent Business’s – NFIB – optimism index for July. Today’s report is showing that small businesses are planning to trim investment and are less optimistic about expansion at this time. This dismal report was due to declining expectations for economic growth, a private survey found. Job growth and consumer and business spending gains are needed to aid in the economic recovery, and at this time, economists are projecting a slowdown during the remaining year. A small business is defined as an independent enterprise employing up to 250 people.

The NFIB’s optimism index decreased to 88.1 while six of the tem components declined, and the group’s measure of expectations for better business conditions six months from now fell to minus 15 percent. This is a nine- point drop accounting for the largest share of the decline in the overall index. The lowest since March 2009, in June the gauge fell by 14 points. Index of earnings expectations fell one point to minus 33 percent in July. The net share of owners projecting higher sales, adjusted for inflation, rose one point to minus four percent.? 

A measure of employment edged up with a net two percent of respondents planning to hire over the next three months, compared with one percent in May and June. Up one point from June -ten percent of firms said they currently had unfilled job openings. Plans for capital investment over the next few months fell by one point to 18 percent. This is a net minus four percent plan to add to inventories, down one point from a month earlier. A net negative 14 percent of business owners expected credit conditions to ease, one point worse than the prior month. A gauge of whether firms think this is a good time to expand also fell by one point to a net 5 percent. The survey showed inflation pressures remain contained, with July being the 20th consecutive month showing more small business owners cutting average selling prices.

NOTE: The NFIB report was based on 2,029 survey responses through July 31, 2010. Small businesses represent more than 99 percent of all U.S. employers and have created 64 percent of all new jobs in the past 15 years, according to the U.S. Small Business Administration.