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Small Business Owners in ‘Holding Pattern’: Survey

Tuesday, 12 Jun 2012 | 7:30 AM ET
Businessman with crystal ball
Fredrik Skold | The Image Bank | Getty Images
Businessman with crystal ball

If there is one thing for certain among small business owners, it’s that the amount of uncertainty they are facing has made it difficult for them to make decisions on spending and jobs.

That’s evident in the results of the National Federation of Independent Business’ latest Small Business Optimism Index, released Tuesday. While the Index fell by 0.1 points, leaving it basically unchanged from April, the various components tell a tale of business owners unsure of many economic factors which would prompt them to invest in inventory and hiring.

“There is so much that is not known,” said William Dunkelberg, chief economist for the NFIB and keeper of the organization’s Small Business Optimism Index. “For those who responded that it was a bad time to expand their business, one in four said it was because of the political situation — not knowing who would win the election. And that we won’t know until November.”

There are some indications that business owners have learned to deal with the situation at hand, and are able to zig when the economy zags.

Among the positive indications was an uptick in those expecting to hire, as well as a rise in the percent of owners reporting hard-to-fill job openings. There are some positives even in the negatives: While more owners expect business conditions to worsen in the second half of the year than expect an improvement, the number of those expressing pessimism decreased.

Many factors remain out of their control, however, including consumer confidence.

“Weak sales are a top problem for business owners,” said Dunkelberg. “We saw another decline in expectations for real sales growth. They’re not real optimistic that customers are going to come through the door.”

For that reason, they are keeping inventories low.

“They’re satisfied with keeping low inventories, which is rare, but it’s been like this for the past couple years,” he said. “Sales remain weak.”

Dunkelberg said there are some positive signs even as the Index remains flat for the month. “We did see the labor market improve,” he said. In the report he also pointed out that the April gains in the employment, sales, and profits indicators held up well in May, which he called a “comforting sign.”

He noted, however, that it could remain this way until November: “We’re in a holding pattern.”

Email us at SmallBiz@cnbc.com and follow us on Twitter @SmallBizCNBC.

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