Today's release of the NFIB Small Business Optimism index for July came in slightly weaker than expected (94.1 vs. 94.5), indicating that small business optimism remains subdued. One would think that with the economy continuing to show signs of recovery, that small businesses would be more optimistic. In spite of continued improvement in housing and the employment picture, though, small business sentiment continues to be weighed down by the double whammy of taxes and government regulations. As shown in the table at right, the top two problems facing small businesses this month continue to be taxes (21%) and government red tape (21%). Next on the list of problems is Poor Sales at 16%. You know something is out of order when businesses have bigger things to worry about than generating sales.
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. As shown, 42% of small businesses cite taxes and government as their biggest problem. This is just 2% off the combined record reading we saw earlier this spring. At the same time that taxes and red tape are trending higher in terms of their impact on small businesses, poor sales has been trending lower and at a level of 16% is now tied for its lowest reading in five years. Imagine how good sentiment would be if small businesses didn't have the government looming over their head?