This morning's release of the Business Optimism Index from the NFIB came in weaker than expected (91.4 vs. 93.8). Last month's decline was the largest monthly decline since November 2012. For some time now, we have been highlighting how even though the US economy is nearly five years into an economic recovery, small business optimism remains subdued. One reason for this depressed sentiment has to do with small businesses being weighed down by the double whammy of taxes and government regulations.
As shown in the table to the right, the top two problems facing small businesses this month continue to be Government Red Tape (21%) and Taxes (19%). Next on the list of problems is Poor Sales at 16%. At these levels two and a half times as many small business owners are worried about issues pertaining to government (taxes and red tape) than they are with actually generating sales. While most would agree that this is not the type of environment that is conducive for business, we would note that the percentage of businesses citing the problems of red tape or taxes dropped six points this month. It's a start at least.
The chart below compares the combined percentage of small businesses that cite Taxes and/or Government Regulations as the number one problem they face to the problem of Poor Sales. Prior to the most recent decline, the gap between 'Government' and Poor Sales had been steadily widening for three years. Whether or not February's decline was a one-month blip or the beginning of a new trend remains to be seen. While less worrying about government would be a positive, we would note that last June we saw a similarly large one-month decline, but then it resumed the upward trend.
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