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Small Business Owners Surprisingly Optimistic About Economy





For the second month in a row, the Small Business Optimism Index has actually gone up, signifying that small business owners are feeling more optimistic about the economy and their own business prospects.

That’s a bright sign, in a sea of constant bad economic news.

Here’s the chart showing the 2-month rise in optimism:

small business optimisim index October 2008

The Optimism Index is part of the Small Business Economic Trends Report for October 2008. The report is put out monthly by The National Federation of Independent Businesses (NFIB) here in the United States. Each month the NFIB surveys small business owners to get a sense of how fiscally “optimistic” they are.

As you can see from the chart, the past year has been darn ugly.  Optimism among small business owners had dropped to historic lows over the past 22 years, since 1986. Yet, incredibly, in the midst of the worldwide credit crisis and wild stock market swings, optimism started rising in the past two months.

The report commentary by William Dunkelberg, the NFIB’s economist, is worth reading.  He puts the current economic situation in perspective, so let me reproduce part of his words here. First he recites the economic uproar that has been going on for the past month.  He suggests it’s time for everyone to calm down and stop predicting the end of the world:

” … if the drum beat of recession, depression, global catastrophe are eliminated from the vocabulary of regulators and the media, some sanity may be restored to expectations.”

But here are the real gems, describing economic conditions for small businesses and suggesting it might be a sign that the economy is bottoming out:

“While all this was going on, small business owners found a way to become more optimistic again, a two month run in improved sentiment (hopefully turning into a trend). Expectations for the economy and firm performance have improved substantially and if this translates into more hiring and spending, the economy can bottom out. Though spending and hiring measures remain weak, they are improving.”

He goes on to say that inflation will continue to be a problem, although it is less of problem in America now that gas prices are falling so dramatically. And for small businesses, unlike larger organizations, getting credit is not as big an issue as weak sales, taxes and inflation:

“Inflation pressures are abating as the percent of owners reporting higher selling prices continues to fall, but remains too strong to reach Federal Reserve policy targets. Lower gas prices will blunt headline inflation, but core inflation will be stubbornly high. Poor sales, taxes and inflation, not credit, remains a top concern for owners. And, the fall in oil prices to the $80 level represents a huge “tax cut” if they stick. Less money spent at the pump will mean more spending on Main Street (or more saving and debt reduction).”

So there you have it as seen through the eyes of small business owners: a few bright signs. It’s too early to tell if they are a trend. Let me point out that some of the worst fears gripping Wall Street and in the credit markets occurred AFTER small business owners were polled for this report.  So it’s possible we could be rudely surprised with the November report.  But at least from this report, things are looking a little brighter for the small business market.

10 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

10 Reactions

  1. Anita,

    It is great to hear that small business owners’ confidence in the future is on rise.

    I think what may best account for that is that we, as a rule, have always felt more in control of our destinies.

    Thanks for sharing this info.

    Jeff

  2. Great to hear that small business owners are remaining optimistic. When you watch the news, you only get the negative side of things. Thank you for providing us something of a positive note. Reading your articles gives me great hope for the future months.

  3. Anita- THANK YOU for that ray of sunshine! I’m getting ready to launch my business in Feb.09 and I’ve been biting my nails wondering if I’m making the right decision. Everytime I turn on the TV or the radio (even my lap top), there’s nothing but ‘doom & gloom’ being predicted. It’s so disheartening at times.

    But, it’s great to read a post like this because it gives me that little boost of confidence to keep working on my dreams and trudging forward!

  4. Anita Campbell

    Hi Kelley (PRIIA Cosmetics),

    Stay focused. I started my business in the middle of the 2001 recession, a week before 9/11. I survived — and since have thrived. And so can you!

    Anita

  5. Hello Anita –

    I love this quote, ” if the drum beat of recession, depression, global catastrophe are eliminated from the vocabulary of regulators and the media, some sanity may be restored to expectations.” and as coincidence would have it, I blogged about a similar subject a few days ago (“Are things really that bad?”).

    Nowadays my biggest fear is that the 24/7 coverage of the financial crisis, coupled with all the pundits throwing in their two cents, are making things worse.

    It’s good to see an uptick on optimism. Perhaps, people are just plain tired of recycled bad news?

    Cheers
    Marco

  6. Anita Campbell

    Hi Marco, I’m with you! I agree that our exposure 24/7 to media and its “bad news” coverage colors our mindset if we let it and makes us feel more negative. It becomes one of those “self fulfilling prophecies.”

    The reality is, we can — and will — survive tough times. It may not be pretty but we get through.

    I survived the Savings and Loan Bailout of the late 1980s; the DotCom bust of 2000, and 9/11. And minor crises in between. And managed to go on to thrive.

    We small biz people can help by giving each other support and concrete help where we can: by hiring one another’s services, buying products from other small businesses, spreading word of mouth referrals, and otherwise doing what we can, when we can.

    And staying positive! 🙂

    — Anita

  7. Well, I too hear news no other than these gloomy days of recession period, in TV News programs, newspaper headlines and even thousands of websites talked about this. I’m excited to know how big the change will be for November but as you have said, Anita – We should stay focused! Even you started your business during recession time- I too am hopeful that we can always thrive for the success of our endeavors and to all small business owners out there.

  8. Thanks for this post – DITTO on every comment here! While the “markets were burning” every single one of my small business clients has been holding steady, doing the right things at the right time and keeping focused on what matters — getting and keeping loyal customers and sticking very close to what they do best that sets them apart.

    But, I have to admit, until I read this report I was wondering if my optimism was getting the best of me.

    Thanks for this wonderful post.

  9. Martin Lindeskog

    It is “Time To Bring Back The Smiley Face To America” 🙂 Click on “Martin Lindeskog” Says if you want to read my piece on Open Forum by American Express. I am following the purchasing managers’ index and the Institute Supply Management manufacturing part for September is the lowest level since October 2001.

  10. Carla | Green and Chic

    Over the past several weeks, I had to keep my nose out of the (internet) news. Its way too discouraging and depressing. I need to stay realistic to a certain point, but I cant let it totally drag me down either. I’m glad to know I’m not the only one who feels this way!

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