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NFIB: Small Business Confidence Inches Up

Tuesday, 14 Feb 2012 | 7:33 AM ET
Yuri Kuzmin | iStock Vectors | Getty Images

The Small Business Optimism Index rose an ever-so-slightly 0.1 points in January, marking the the fifth increase in a row.

“The good news is, it’s not going down,” William Dunkelberg, chief economist of the National Federation of Independent Business, told CNBC.com. "But there's still a lot of bad news out there." The NFIB surveyed 2,155 small business owners about how they for the monthly survey.

Dunkelberg pointed to a lack of consumer spending as reason for wariness among small business owners. “Consumers are still pessimistic. The average age of cars is the highest it’s ever been; people don’t buy things unless they need them.”

And if consumers aren’t spending, neither are business owners. “They will only spend if the roof is leaking and the machines have stopped working,” he said.

Respondents who said they would make capital outlays this month was unchanged from December, when 24 percent said they planned to invest money in their businesses. Only 9 percent said it was a good time to expand; down from 10 percent the previous month. And, perhaps most telling, plans to order new inventory declined by 5 points from December.

Still, some good news did creep into the report. Job growth among small businesses is increasing. Over the next three months, 13 percent plan to increase employment, which is up four points from December, while 7 percent plan to reduce their workforce. This is in line with the Bureau of Labor Statistics’ announcement earlier this month that the unemploymentrate had declined to 8.3 percent.

President Obama’s proposed 2013 budget, released on Monday, addressed small business concerns such as taxes and federal regulation, along with proposals to increase taxes on the wealthy. Whether these proposals will help instill more confidence among small business owners remains to be seen, said Dunkelberg.

“If it provides a sensible path to deficit reduction, then people will take heart. But if consumers continue to feel the economy is bad, that will hurt business growth.”

The index, a measurement of small business confidence, is currently at 93.9; it is struggling to work its way back to the pre-recession level of 94.6; it has not been that high since December 2007.

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