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Small Business Owners Remain in ‘Maintenance Mode’ on CAPEX Plans

January 10, 2013, 07:07 AM
Filed Under: Economic Commentary

Small-business owner confidence did not rebound in December, according to the National Federation of Independent Business (NFIB) Small Business Optimism Index. While owner optimism crept up 0.5 over November’s historically-low report, the 88 point reading was still the second lowest since March 2010. December’s poor report resulted largely from a deterioration of labor market components, and the surprising percentage of owners who still expect business conditions to worsen in the next six months.

The Index is at a recession level reading as pessimism prevails; December’s reading is certainly not typical during a recovery. Seventy (70) percent of owners surveyed characterized the current period as a bad time to expand; one in four of them cite political uncertainty as the top reason. Taxes (23 percent) and regulations (21 percent) rank as the top two business problems, with “poor sales” as a close third (19 percent).

Capital Expenditures: Capital spending remained in “maintenance” mode—historically low—and plans to make capital outlays remained at recession levels. The frequency of reported capital outlays over the past six months fell 1 point to 52 percent. The percent of owners planning capital outlays in the next three to six months rose 1 point to 20 percent. Eight percent of owners characterized the current period as a good time to expand facilities (up 2 points), but the net percent of owners expecting better business conditions in six months was a net negative 35 percent, unchanged from November’s sharp decline. Not seasonally adjusted, 11 percent of owners expect an improvement in business conditions (up 2 points), and 45 percent expect deterioration (down 4 points). A net negative 2 percent of all owners expect improved real sales volumes, up 3 points. Overall, there was no sign that capital spending might be returning to levels more consistent with past recovery periods.

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