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U.S. Small-Business Optimism Falls Sharply in December — NFIB

By Xavier Fontdegloria

Small-business owners confidence in the U.S. economy fell significantly in December amid the resurgence of the coronavirus pandemic and the related restrictions to contain it, data from a survey compiled by the National Federation of Independent Business showed Tuesday.

The NFIB Small Business Optimism Index came in at 95.9 in December, 5.5 percentage points less than in November. The reading stands below the historical 47-year average of 98 points for the first time since May and misses forecasts by economists, who polled by The Wall Street Journal expected it to come in at 100.00.

The NFIB is a monthly snapshot of small businesses in the U.S., which account for nearly half of private sector jobs. Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy.

Most of the decline in December's headline figure was a result of substantial weakness in the outlook for sales and business conditions in 2021, which brings new Covid-19 threats and the uncertainty about economic policy with a new administration in Washington, said NFIB Chief Economist Bill Dunkelberg.

"Concern about economic policy in the new administration and the increased spread of Covid-19 that is leading to renewed government mandated business closures have owners pessimistic about future conditions over the first half of 2021," he said.

In December, nine of the 10 components that form the index declined, while one increased.

Small-business owners expecting better business conditions over the next six months decreased by a sharp 24 points to a net negative 16%, while sales expectations over the next three months fell 14 points to a net negative 4%.

"The decline in expected business conditions and expected real sales accounted for two-thirds of the index decline and will impact owner decisions about hiring, inventory investment, and capital spending," Mr. Dunkelberg said.

Job creation plans, job openings, capital expenditure plans, the number of owners who think it is a good time to expand, actual earning trends, inventory plans and expected easier credit conditions indexes all fell, albeit to a lesser degree.

The only indicator that increased is the percentage of owners viewing current inventory stocks as too low, which rose by two points to a record-high 7%.

The NFIB Uncertainty Index decreased eight points to 82, suggesting the current views of the respondents are held with greater certainty, the report said.

 

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

 

(END) Dow Jones Newswires

January 12, 2021 06:14 ET (11:14 GMT)

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