Small business ‘uncertainty’ plunges in December - North Atlanta Business Post
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Updated Nov 14 @ 1:05PM


Small business ‘uncertainty’ plunges in December

Incoming Trump administration seen as steadying influence on economy

The post-election November SBET survey found that 45 percent of the owners said that the current environment was a bad time to expand their businesses. That was substantially down 6 points from the 51 percent reporting the same before the election. Post-election, 27 percent blamed the “political climate” for their negative expansion views, compared to 41 percent who responded before Nov. 8. Clearly resolving this uncertainty is important to owners planning the future course of their firms’ spending and hiring.

Charting the business horizons is among the most challenging aspects for businesses because for most companies, large and small, timing can mean everything.

Therefore, uncertainty is a significant barrier to economic growth, especially in the small-business sector. Uncertainty limits the ability of small-business owners to pursue investment opportunities in their business.

The National Federation of Independent Business’s survey of 2016 Small Business Problems and Priorities found that two of the top 10 most severe problems affecting small-business owners are uncertainty-related.

Uncertainty over economic conditions and uncertainty over government actions are ranked fourth and sixth out of 75 business problems. About a quarter of small business owners say both are a “critical” problem in operating their business.

So what is “uncertainty?” It is the inability to anticipate the outcomes of important future events which are critical to planning and forecasting for the firm.

The NFIB measures the rise and fall of the level of that discomfort in NFIB’s Uncertainty Index created from responses to six questions from the monthly Small Business Economic Trends survey.

The index is based on the frequency of “don’t know” and “uncertain” responses to the survey.

The Uncertainty Index fell 15 points in December after reaching a 42-year record high level in November. More small-business owners could directionally anticipate future events or conditions.

The index components “General Business Conditions” and “Capital Expenditure Plans” were the main contributors pushing the index lower with more respondents moving from “don’t know” to “better” or “increase.” Uncertainty is still at a historically high level, but easing.

ATLANTA – Since President-elect Donald Trump’s victory in November, the confidence of small business owners has continued to grow as reflected in the monthly National Federation of Independent Business (NFIB) Uncertainty Index.
After reaching a 42-year high in uncertainty in November, it fell 11 points in December.
The Uncertainty Index is one subset of data collected for the NFIB Small Business Optimism Index, said NFIB Director of Communications Jack Mozloom.
“Among the questions we ask members to tell us are their expectations to hire, invest capital and give their estimate of the economy in six months. With these kinds of questions we are asking them to anticipate the near future,” said Mazloom.
“Typically, most members say good or bad or yes or no. What we saw leading up to the election were record numbers of members saying, ‘I don’t know.’ They could not anticipate the future. They were just uncertain.”
That broke all records for uncertainty in NFIB’s four decades of polling. The larger Optimism Index had been flat the six years, Mazloom said.
“So small business owners have been essentially just treading water the last several years. After the election, the numbers just broke out. They all showed high numbers of optimism after the November election.
“The December numbers have continued to trend in that direction,” he said.
While actual job creation was flat in December, if the uncertainty numbers continue to improve in the coming months, NFIB expects to see more hiring and more business activity in terms of investing and more jobs creation and more growth.
“With 42 years of monthly data collection, the Small Business Confidence Index is one of the most reliable indicators of the economy that there are,” Mazloom said.
Specifically, business owners were responding to Trump’s declarations of his intentions to cut red tape and regulations.
“Trump has also been vocal on fixing Obamacare, and that is something that has been very hard on small businesses owners. We’ve surveyed our members every year, and they tell us their premiums have spiraled out of control,” Mazloom said.
Other moves by Trump have enhanced business optimism.
“President-elect Trump made some important cabinet nominations in December which suggest a much better tax and regulatory environment for small businesses,” said NFIB President and CEO Juanita Duggan in a Jan. 4 statement. “Small business owners are breathing easier as the new administration’s economic policies come into view.”
Small business owners like what they see so far, said NFIB chief economist Bill Dunkelberg.
“The new management team that is shaping up has a much different view of government’s role in the economy than the outgoing administration,” Dunkelberg said. “They are pledging to cut regulations, taxes, and health insurance costs. Small business owners are starting to think about how to invest that money in growth.”

  • The NFIB Uncertainty Index tumbled 15 points, from 100 to 85. The percentage of owners who are unsure if the economy will be better in the next six months fell from 23 percent to 12 percent in December. 
  • The percentage of owners unsure about making capital expenditures fell from 20 to 10 percent, another signal that small business is on the verge of a breakout. 

“These are positive signs that small business is ready to lead the expansion with new investments and new jobs,” Duggan said.

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