SMBs Growing Less Confident — But Why?

Optimism among small business owners in the United States may be fading.

The Wall Street Journal noted on Wednesday (Feb. 10) that an index used in order to gauge sanguine expectations among small businesses was off by 1.3 points in January to a reading of 93.9 in Jan. 2016, marking the lowest level in two years. The latest reading by the National Federation of Independent Business was also below the 2015 average annual reading of 96.1, said WSJ. The index is calculated using the responses of 1,400 small business owners.

The decline in optimism can be traced to less heightened expectations over sales and general business conditions, which can also be traced to stock market and global economic volatility. The sentiments grew darker looking out six months, with a reading lower than at any time in 27 months.

Though expectations for sales may be muted, hiring still continues, with hiring at levels not seen since September, and wage growth has recently been on the rise, with 27 percent of respondents stating that they have boosted worker paychecks (the strongest showing in nine years), a trend mirrored, in some cases, across other measurements, such as the PYMNTS Store Front Index. Elsewhere, the most recent reports for January that have come from payroll processor Automatic Data Processing said that hiring was strong in the small business sector, a finding also presented by Moody’s Analytics.

In the end, though forward-looking thoughts may be a bit grayer with a six-month horizon, hiring still continues apace, and expansion plans are also still in place. That signals, at least with the tea leaves hidden in a month’s data, that no real falloff in business expansion (or perhaps even creation?) is imminent.