Small Business Optimism Begins Its Downswing

After record levels of optimism among U.S. small business owners last year, it appears the trend may be over.

Reports in the Wall Street Journal on Tuesday (Jan. 8) said entrepreneurs in the U.S. are less optimistic about the national economy, with economic outlook dropping for the fourth month in a row, according to analysis from the National Federation of Independent Business (NFIB).

The NFIB’s optimism index dropped to 104.4 in December, its lowest level since late-2016, according to reports. That’s after a record high for the Index of 108.8 last August.

The NFIB’s president, Juanita Duggan, previously described the Index’s highs last summer as “astounding,” with New York Times reports in July pointing to corporate tax cuts and economic growth as key factors behind corporate confidence, despite rising credit card debt, trade disputes, a growing federal deficit, and other factors that would normally be linked to a drop in optimism.

In addition to lower optimism, small business owners surveyed by the NFIB for the Index also showed a decline in the number of entrepreneurs who say now is a good time to expand their businesses. For some, current economic conditions and political uncertainty are to blame for holding off on expansion.

Even so, the NFIB noted that levels of optimism among small business owners remain historically strong.

“Over the past few months, owners’ expectations for the future have tempered, while reporting continued solid economic activity,” the NFIB stated, reports said. “The Index remains at historically high levels but can’t be expected to improve every month.”

Separate data from the University of Michigan’s index of consumer sentiment showed an increase in consumer confidence last month, though another report from the Conference Board also found rising concerns over the economy, reports said.

Last month bookkeeping technology firm Bench published a survey that found younger entrepreneurs tend to have higher aspirations for their businesses than entrepreneurs 45 and older, yet younger entrepreneurs also tend to be less knowledgeable about company finances and bookkeeping.