Economy

NFIB Survey Shows SMB Optimism Slips Amid COVID-19

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Recent surveys and data points show that the sanguine outlook held by small and medium-sized businesses (SMBs) coming into 2020 — underpinned by rising revenues, growing demand and a strong economic backdrop — has evaporated in the wake of the coronavirus.

In one of the latest tallies, the NFIB Small Business Optimism Index slid 8.1 points in March, coming in at 96.4, the largest decline in the history of the survey, said the federation.

At a top-level view, nine of the 10 index components slipped, which the NFIB said “is evidence that economic disruptions are escalating on Main Street as small businesses struggle to keep their door opens.” Many firms see further disruptions ahead, according to the survey, as the coronavirus pandemic continues.

Drilling down into the data based on responses from 627 firms, readings of uncertainty rose 12 points in March, the highest reading in three years. Sales expectations declined 31 points to negative 12 percent, the largest decline in the survey’s history. Job openings were down 3 points to 35 percent. The NFIB cautioned that the data were collected in the first half of the month, and so the results do not reflect sharp job losses seen later in the month.

Firms reported that profits slipped during the latest survey, and 32 percent said that weakening was due to weaker sakes, 26 percent on seasonal changes. Another 9 percent cited pricing changes.

The NFIB readings on optimism come after another survey of smaller firms done by the same organization showed that roughly half of smaller businesses queried could survive for only two months due to the current business environment; one third said they would be able to last three months to six months.

Separately, as noted in this space yesterday, the March survey of consumer expectations by the Federal Reserve Bank of New York released Monday (April 6) found firms spotlighting their mounting worries over job losses, debt and spending as the coronavirus pandemic continues to wreak havoc on the U.S. economy.

“The March survey, which was fielded between March 2 and 31, records a substantial deterioration in financial and economic expectations,” said the authors of the survey, “including sharp declines in household income and spending growth expectations.”

According to the data, the number of consumers who said losing their jobs seemed a “probability” was 18.5 percent, which the Fed post said was a record reading since the survey debuted in 2013.

The NFIB and New York Fed releases underscores the urgency we at PYMNTS found in our own survey, titled “Main Street on Lockdown,” which surveyed more than 200 SMBs on March 24.  As detailed in that report, the firms we spoke with said they had only enough cash on hand to get through the next 20 days before having to tap into additional means of funding, such as through personal credit lines or loans (such as the ones on offer through the SBA).

We’ve estimated that Main Street represents 28.3 percent of total employment, 36 percent of total establishments and 23.2 percent of wages. As Main Street goes, so goes GDP. The initial belt tightening at the end of the month and headed into last week’s launch of the Paycheck Protection Program show roughly 28 percent of SMBs we queried asked their staff to work fewer hours. Another 23 percent have started to lay people off.

A staggering 89 percent of the companies we surveyed expect to generate lower revenues this year than they saw in 2019. More than a quarter (26 percent) of SMBs surveyed doubt they’ll survive the COVID-19 pandemic. A third (33 percent) aren’t sure they will. The key variables are how long the shuttering of millions of firms and lockdowns spanning the U.S. will last — and when demand will return.

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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