The National Federation of Independent Business said that small business owner confidence was virtually unchanged in May. The Small Business Optimism Index edged slightly lower from 94.5 in April to 94.4 in May. The longer-term trend is more positive, as the index stood at 90.9 at this point last year. Still, small businesses remain concerned about the economy, with the index well-below the threshold of 100 which would suggest growth for the sector.

The net percentage of respondents saying that the next three months are a “good time to expand” was also unchanged at 7 percent, where it has stood for three consecutive months. For those saying that it was not a good time for expansion, the economy was the top concern, with political uncertainty also a factor. With that said, last month “poor sales” dropped from being the top concern for the first time since 2008 to second place. This top concern this month is “taxes,” perhaps a recognition of the expiration of tax cuts at the beginning of 2013. After taxes, the top concerns were sales and the regulatory environment.

The data points behind the index were mostly mixed. Expectations of sales, earnings and capital spending were lower. In contrast, it appears that small business owners are stepping up their hiring, with employment and job openings measures showing increases. Credit conditions remain an ongoing concern.

Chad Moutray is chief economist, National Association of Manufacturers.

The National Federation of Independent Business said that small business owner confidence was virtually unchanged in January from December. Its Small Business Optimism Index rose from 93.8 to 93.9 for the month. Traditionally, the sector is said to be expanding when the index is 100 or greater. Still, this represents an improvement from its 88.1 reading of August.

The net percentage of respondents saying that the next three months are a “good time to expand” fell from 10 percent to 9 percent. The top concern for those replying that now was not a good time to expand was the economy, followed by the political climate. But, it is important to keep these comments in perspective. As with past surveys, poor sales remains the “single most important problem” facing small business owners, with 22 percent giving this answer. That response, though, is below the 27 percent who said so last year, suggesting some improvement. (The second most important problem is government regulations and red tape, cited by 20 percent of respondents.)

Some of the indicators in the survey point to increased optimism, even if the overall figures remain subpar overall. For instance, the net percentage of those expecting greater sales in the next three months rose to 10 percent, up from -12 percent in August and 9 percent in December. Employment and capital spending plans are also positive, but job growth is expected to be modest.

One of the larger challenges for some small firms has been with access to credit. This survey finds some improvements on credit availability, but is also suggests continued difficulties for some.

Chad Moutray is chief economist, National Association of Manufacturers.

The National Federation of Independent Business released is monthly Small Business Economic Trends this morning, with Small Business Optimism rising from 92.0 in November to 93.8 in December. It was the fifth consecutive monthly gain, up from 88.1 in August.

Along with the gain in confidence, the net percentage of respondents saying that the next three months are a “good time to expand” has increased to 10, its highest level since before the recession. Likewise, small business owners are also more optimistic about future sales, employment and capital spending.

Nonetheless, it is important to note that small businesses remain anxious despite these improvements. Traditionally, small businesses are experiencing strong growth once the Optimism Index exceeds 100 – a threshold that it has not surpassed since 2006. Moreover, of those suggesting that now is not a good time for expansion, poor economic conditions and an unsettling political climate are cited. The single most important problem continues to be “poor sales” followed by taxes and government regulations.

Chad Moutray is chief economist, National Association of Manufacturers.

Small businesses became more pessimistic in August, according to the National Federation of Independent Business (NFIB). Their Small Business Optimism Index fell from 94.1 in January and 89.9 in July to 88.1 in August. This nearly matches where the index was one year ago.

Economic concerns were behind this decline, with 53 percent saying that the economy was not good and 13 percent noting economic uncertainty. The single most important problem continues to be poor sales, as cited by 25 percent of respondents. On the other hand, if one were to add together regulatory and tax concerns, this would top sales at 37 percent.

Small business owners on average expect sales to fall in the coming months. Twelve percent more of these owners see their sales falling than those who expect increases in the next three months. Likewise, more small businesses shrank employment than expanded it over the last three months. Looking ahead, a net 5 percent expect to hire, an improvement from July (which was a net +2 percent) but still not suggesting fast growth.

Meanwhile, the National Association of Business Economics (NABE) reported in its quarterly Outlook Survey that real GDP is expected to grow 1.7 percent this year, down from the earlier estimate of 2.8 percent made in May. Similarly, business economists foresee 2.3 percent growth in 2012 instead of 3.2 percent.

The reasons for the downgrade are multifaceted. First, the Bureau of Economic Analysis has reported much slower growth in the first half of this year than many economists expected (0.4 percent in the first quarter and 1 percent in the second). Second, businesses have faced a number of significant headwinds this year, from supply chain disruptions to rising raw material prices to falling business and consumer confidence. Growth in spending has been flat as a result. (continue reading…)

Despite some progress in overall economic conditions since the recess, small business owners remain anxious about the economy. These concerns have had real impacts on the smaller firms’ willingness to invest in their businesses, hire additional workers, or seek additional capital.

Given that smaller businesses have traditionally led economic growth coming out of a recession, the fact that this is not happening this time around is hampering employment and economic growth. Two recent surveys have highlighted this fact.

First, the U.S. Chamber of Commerce conducted it’s annual Small Business Outlook Survey. Nearly half of small businesses, defined as those with under $25 million in annual sales, felt that economic uncertainty was their top concern. Other top challenges included fiscal efforts to address the federal deficit and debt, government regulations and the Health Care law.

In addition, 64 percent intended to keep the same number of employees over the next year, with 19 percent planning additional hiring. Interestingly, despite negative views on the national economy, almost two-third report that their own businesses are “on the right track.”

Earlier today, the National Federation of Independent Business released its Small Business Optimism Index, which fell from 90.9 in May to 90.8 in June. While virtually the same as the previous month, the index reflects continued wariness on the part of small business owners. Over half of the respondents who suggested that the next six months were not a good time to expand, said that economic conditions were the reason. The top concern remains “poor sales.”

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau stated that retail sales fell 0.2 percent in May, its first decline since June 2010. The largest decliner was motor vehicle and parts sales, which dropped 2.9 percent from the previous month. Excluding autos, retail sales rose 0.3 percent. Even with these declines, however, it is important to note that retail sales were up 7.7 percent since May 2010, with auto sales up 5.4 percent over the past year.

Consumers continue to be pinched by rising prices. (Note that the consumer price index data for May will be released tomorrow.)  As a result, the weakness in spending went beyond automobiles. Other sectors with declining sales in May were electronics and appliances (down 1.3 percent), furniture and home furnishings (down 0.7 percent), food and beverages (down 0.5 percent), sporting goods and hobbies (down 0.4 percent), and general merchandisers (down 0.1 percent).

Bucking this trend, though, was strong growth in sales from nonstore retailers and building supply stores (both up 1.2 percent). Reflecting upward movement in energy prices, gasoline stations experienced a 0.3 percent increase in sales in May and a 22.3 percent rise year-over-year.

A second report released today shows that small businesses remain pessimistic about the economy – definitely not a good sign. The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index fell from 91.2 in April to 90.9 in May.

This was the third consecutive month of declines, with the index standing at 94.5 in February. Figures under 100 usually indicate weakness in the small business sector, and respondents appear to be hesitant to expand their businesses, hire new workers, and invest in new capital. The top concern remains poor sales, but perhaps reflecting inflationary pressures, 31 percent of respondents indicated the need to raise prices.

Overall, these two economic indicators reinforce the notion that the economy has weakened somewhat in the second quarter of 2011. Rising energy, food, and raw material prices continue to take their toll, but there are also other headwinds, both temporary and otherwise, which are serving as a drag on the economy. The NFIB survey is more pessimistic than other surveys, including ours, and there I remain cautiously optimistic about manufacturing output in the second half of 2011. 

Yet, these numbers are enough to remind us that economic growth remains tenuous, and for the manufacturing sector to continue to grow, we need to have the right economic and policy environment.

Chad Moutray is chief economist, National Association of Manufacturers.

Wisconsin Gov. Scott Walker, who took office just this month, has an early victory in his effort to improve the state’s business climate, the major tort reform package introduced in the special session of the Legislature he called to pass jobs and economic growth bills. He signed the bill, SB1, in the governor’s conference room on Thursday.

From The Milwaukee Journal-Sentinel story, “Walker signs bill limiting court awards in injury cases“:

“This is a balance we are trying to create, to make sure certainly those who do damage and do harm are rightfully going to be penalized, even when this act becomes law,” Walker said. “But for those who have been . . .  threatened with frivolous lawsuits, particularly for small business, they’re going to receive relief today because . . .  we move forward in cutting back on frivolous lawsuits and out-of-control lawsuit abuse in the state of Wisconsin.”

Credit also goes to the state Senate and Assembly, which passed the legislation.

Wisconsin Manufacturers and Commerce, an effective and energetic supporter of the legislation hailed the bill’s signing. “These reforms will add certainty, fairness and predictability to our legal system,” said James A. Buchen, WMC vice president of government relations. The key provisions, according to WMC: (continue reading…)

A news roundup, in other words…

Rep. Tom Cole (R-OK), Edmond Sun, “Obama’s policies stifle economic growth“: “EDMOND — In less than five weeks, tax hikes will go into effect for virtually all tax brackets unless Congress takes action. Despite public and bipartisan support for maintaining the current tax rates, President Obama and Democratic leaders in Congress have repeatedly refused to bring the issue to a vote. President Obama insists that his plan to raise taxes on the highest tax brackets will not affect job creators, but the facts indicate otherwise.” The Congressman cites the recent WSJ op-ed by John Engler and Jerry Howard, “Tax Hikes and the Small Business Job Machine.” Thank you.

Bloomberg, “Return of Estate Tax Looms as Final Impediment to Extending Bush Tax Cuts“: “In the past year trade groups such as the National Federation of Independent Business and the National Association of Manufacturers, alarmed by the possibility of a 55 percent rate in 2011, have pivoted toward urging lawmakers to adopt the approach favored by Kyl and Lincoln.” That’s an accurate assessment.

The Senate voted 61-35 on Tuesday for a motion by Sen. Mike Johanns (R-NE) to suspend the expansions of IRS 1099 reporting requirements imposed by the new health care law, but he needed 67 votes for the measure to proceed. Bloomberg reports the NAM’s opposition in its coverage, “Repeal of Health Law’s ‘Onerous’ Business-Expenses Rule Fails“: “The U.S. Chamber of Commerce and the National Association of Manufacturers, both based in Washington, and the Nashville- based National Federation of Independent Business supported repeal of the 1099 rule, saying the requirement would be cumbersome for business owners.” Cumbersome, yes. Stupidly, insanely burdensome and costly, as well.

A related motion by Sen. Max Baucus (D-MT) to get rid of the 1099 reporting requirement failed 44-53.

Investor’s Business Daily, “As EPA Goes Green, Businesses See Red From Lack Of Guidance“: “Big business is bracing for a series of Environmental Protection Agency regulations set to begin in January. The problem is, it doesn’t really know what those regulations are going to be. Neither does the EPA, which has essentially punted that responsibility down to the states.” Meanwhile, Administrator Jackson celebrates the 40th anniversary of the EPA. We suggest the slogan, “Regulatory Excess since the Nixon Era!”

As Singapore Goes, So Goes Spain. Isn’t that a strange concept? The Daily Record of Scotland reports, “Spanish manufacturers ordered to make chewing gum ‘less sticky’“: “Manufacturers have been ordered to change their formula so the gum is easier to clean from pavements. The problem was considered so serious that PM Jose Luis Rodriguez Zapatero held a cabinet meeting to tackle the issue.” We await the bureaucratic battle here in the United States to address the problems: FDA or EPA? What with the streets and nuisance and all, it might make Transportation Secretary LaHood’s priority list, too. Bicyclists hate getting gum on their gumwall tires.

The National Association of Manufacturers today began TV and radio advertising in nine states to oppose tax increases on energy production, which some members of Congress want to enact when they reconvene in Washington next week.

In a statement, NAM President and CEO John Engler said: “Our message to Congress is very clear. At a time when unemployment remains over 9 percent, costly energy taxes will make our nation’s economic situation worse by raising costs for businesses and consumers and hurting businesses’ ability to compete in a global marketplace. We are encouraging manufacturers, small businesses and the public to tell Congress to say yes to jobs and no to higher energy taxes.”

The National Federation of Independent Business is joining the NAM in sponsoring the ads. Thank you, NFIB!

Television and radio spots will run in Arkansas, Colorado, Indiana, Maine, Missouri, Nevada, Ohio, Virginia and West Virginia. The spots urge Senators in the states to, “Say yes to jobs, and no to higher energy taxes.”

The Wall Street Journal’s John D. MacKinnon has blogged on the new campaign, “Business Groups Target Higher Energy Taxes.”

The Hill today surveys business trade associations and finds, “Businesses lackluster in support of jobs bill.” Excerpt:

NAM spokeswoman Laura Narvaiz said the group supports the additional infrastructure spending in the jobs package as a way to create jobs and growth. But she said the jobs bill needed to be more “comprehensive.”

“We remain concerned … that the House jobs bill doesn’t go far enough to ensure long-term growth and create lasting high-paying jobs,” Narvaiz said.

The U.S. Chamber opposes the reallocation of remaining TARP funds, while the NFIB objects to the lack of a payroll tax holiday.