After a strong three-month rally and improved employment conditions, small business optimism declined last month as capital outlays and planned spending faded along with expectations for better business conditions. Making matters worse, economic growth is expected to remain subdued amid the typical political environment.
The National Federation of Independent Business, a nonprofit small business association representing small and independent businesses, reported that its Small Business Optimism Index fell to 95 in June, down 1.6 points from the prior month. May was the best reading for the index since September 2007. At the beginning of 2013, the index posted a reading of 88.9. The latest reading is still below the pre-recession average of 100.
“While reports of actual net job creation per firm were positive, consumer and business owner optimism remain low, with both spending growth and sales expectations weak. This means there are more jobs but not much more output,” said NFIB chief economist Bill Dunkelberg. “With election day months away and no sign of change in Washington, economic growth for the rest of the year will continue to be sub-par. The unemployment rate will fall more due to people leaving the labor force than to jobs being created and fewer hands making GDP.”