Small Business Confidence Index Near Record Lows

Confidence among small business owners dropped to the second-lowest level on record in January, suggesting the year-long recession could last until the second quarter of the year, according to a survey released Tuesday.

The National Federation of Independent Business said its index of small business optimism fell 1.1 points to 84.1, the second-lowest reading in the organization's 35-year history.

"The failure of the index to rebound from historic low readings as it did in 1980 indicates that the recession will encompass the first quarter, with little chance for a bottom before the second quarter," said NFIB Chief Economist William Dunkelberg.

The U.S. economy slipped into recession in December 2007, driven by the collapse of the housing market. Economists are cautiously optimistic that the economy will start to recover in the second half of this year.

Small business owners reported a decline in average employment in January, the second-largest monthly decline in the survey's history. The frequency of capital outlays was steady at 51 percent of all firms, after falling five points in December.

"There is a pulse, but it's weak and the pool of deferred projects continues to grow," said Dunkelberg.

Capital expenditure plans over the next few months rose 2 points to 19 percent, but remained at historic low levels.

Owners were generally not expecting to build their inventories and about 58 percent reported a fall in profits.

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