The National Federation of Independent Business performed some time-bending on its Website Tuesday morning. The link for the much-anticipated July survey of small-business sentiment pointed readers to the previous month's survey; the current one was missing. So, for a brief hour, it looked like small-business owners were slightly more optimistic about the direction of the U.S. economy, as they had been in the June report. That would have been good news amid the din of reports about credit-starved small businesses.
If only. Instead of the NFIB optimism index having risen 1.6 points as it did in June (continuing a gradual ascent), in July it actually dropped by 3.2 points. Small businesses are as pessimistic as they were at the beginning of the year, and trends in the NFIB survey's components are anything but encouraging.
On a seasonally adjusted basis, for example, only 9% of NFIB members have unfilled job openings, and only a net 1% of firms plan to create new jobs. The number of firms planning capital expenditures is still near a 35-year record low, and small businesses continue to liquidate inventories: 21% more firms reported a depletion of inventory in the last three months than those that reported gains, and 3% more firms plan to cut inventories than add them in the coming three months.
It's easy to blame the banks for all this pessimism, and Federal Reserve chairman Ben Bernanke did so in a speech on Monday. "It seems clear that some creditworthy businesses -- including some whose collateral has lost value but whose cash flows remain strong -- have had difficulty obtaining the credit that they need to expand, and in some cases, even to continue operating," said Bernanke at a Fed meeting on addressing the financing needs of small businesses.
However, the 800 or so members of the NFIB say access to credit is not their biggest problem. No, the top problem is poor sales, say 30% of firms. It's no wonder: data out today shows that retail sales in the U.S. tumbled half a percent in June after falling more than 1% in May. Consumers bought fewer cars and car parts, and less furniture, sporting goods, books, and music. That spells trouble. With revolving consumer credit (credit cards) falling 10% in the latest Fed statistics, government stimulus programs running out, and time travel still in development mode, the economic horizon for small firms looks dark indeed. |
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