U.S. Small-Business Optimism Slumps to Seven-Month Low

The National Federation of Independent Business index of sentiment decreased by 5.5 points to 95.9, the group said Tuesday. The figure was weaker than the median projection of 100.2 in a Bloomberg survey of economists.

“This month’s drop in small business optimism is historically very large, and most of the decline was due to the outlook of sales and business conditions in 2021,” said NFIB Chief Economist Bill Dunkelberg. “Small businesses are concerned about potential new economic policy in the new administration and the increased spread of COVID-19 that is causing renewed government-mandated business closures across the nation.”

Nine out of the 10 subindexes declined in December. As renewed lockdown measures continue to weigh on business activity, sales expectations dropped to minus 4%, the lowest since May. Additionally, a gauge of owners’ outlook for general business conditions fell to the lowest level since April 2016.

“Business restrictions and consumer spending shifts are still firmly in place and will be until the spread of Covid-19 is largely curbed,” Bill Dunkelberg, NFIB chief economist, said in a statement. “The U.S. economy moves into 2021 with many of the same challenges it faced in 2020 but new opportunities and challenges will certainly change the landscape going forward and small businesses will continue to adjust accordingly.”

The share of business owners thinking it’s a good time to expand business decreased 4 percentage points to 8%. Plans to add jobs and make capital expenditures also deteriorated.