Confidence in small business owners in the U.S. took a hit in July as the coronavirus case escalated and plans to reopen were delayed or restored, data from the National Federation of Independent Businesses showed Tuesday .
The NFIB’s Small Business Optimism Index fell 1.8 points to 98.8 in July. Economists had expected the index to maintain its June level of 100.
“This summer has been a challenge for many small business owners who work hard to keep their doors open and stay in business,” said NFIB chief economist Bill Dunkelberg.
The index has generally ridden high during President Donald Trump’s first term, but tumbled nearly 20 points in March and April, the biggest drop in the index ever. That slide stopped in May and the index climbed higher in June when the economy resumed.
Reports of expected better business conditions over the next six months slipped 14 points to a net 25 percent, a steep decline indicating that companies are realizing that it will take longer and be less flexible as the virus hits the US economy remains plague.
The index is compiled from a monthly survey conducted by NFIB members. July saw increase in four of the 10 index components compared to June. Five components were rejected and one was not changed.
Plans to increase employment improved for the month, with a net 18 per cent of companies saying they would hire in the next three months. That is 2 points up from June and 17 points above the low in April.
Nearly half, 49 percent, of owners reported capital expenditure in the last six months, one point up from June but 14 points below the January level. Twenty-six percent of owners plan capital outflows in the coming months, a rise in June but still low enough to be a ‘recession level’, according to the NFIB.
“Currently, the prospects for growth in sales are not strong and the levels of uncertainty are high, both limiting investment for the future,” the NFIB said in its report.
A net negative 28 percent of all owners reported higher nominal sales in the past three months, 3 points up from June, but still what the NFIB calls “a terrible number”.
“Even with reopened states, sales are often lower due to business constraints, social distance requirements, and an even reduced willingness of consumers to go out and mingle with the general population,” the NFIB said.
Expectations of sales in the next 3 months fell 8 points to a net 5 percent.
“The closure of stores and shelters caused a 13 percent decline in consumer spending in April. Then, whipsaw, spending in May was up 16 percent, ”the NFIB said. “Lower-income consumers increased their spending to near pre-Covidlevels, but higher-income consumers held back.”
The NFIB Unceribility Index increased 7 points to 88.
