Small businesses grew more pessimistic about their economic outlook in June in the face of weak sales and political uncertainty, the National Federal of Independent Businesses said on Tuesday.
The NFIB's monthly survey of members showed the small business optimism index fell by 3.2 points in June, dipping to 89, after posting several months of gains.
Seventy percent of the decline this month resulted from a deterioration in the outlook for business conditions and real sales gains, the NFIB survey concluded. The report is based on 805 responses to a random survey of NFIB members.
The performance of the economy is mediocre at best, given the extent of the decline over the past two years, the NFIB survey concluded. Pent-up demand should be immense, but it is not triggering a rapid pickup in economic activity.
Very few small businesses plan to create new jobs, according to respondents. The survey showed that only 10 percent of firms plan new hiring, that is down 4 points from May, the NFIB said. About 8 percent of firms plan to reduce their workforce, up one point from the previous month, the group said.
Small businesses account for a major share of jobs in the U.S. economy. Declining confidence among small businesses could dash Democratic hopes of an improving economy before the November congressional elections and give Republicans an edge in their bid to retake control of Congress.
The number of business owners planning to make capital expenditures over the next few months fell a point to 19 percent, 3 points above the 35-year record low, the NFIB said.
The survey showed more firms are looking at declining sales than are expecting higher sales. Many are cutting prices to attract customers and are liquidating inventories, the survey said. The number of firms planning to add to inventories fell in June, the survey said.
This indicates that the 'inventory' stimulus in this cycle is likely fading, the report concluded.