Economic upheaval shocks business owners

October 14th, 2008, 3:00 am · Post a Comment · posted by Jan Norman, small-business columnist

Recent stock market and economic upheaval have knocked the wind out of small-business owners, according to the National Federation of Independent Business. Their optimism was improving in early September, but tanked after news of major business failures starting with Lehman Brothers bankruptcy.

NFIB, which has been taking small-business economic pulse since 1973, took the extraordinary step of comparing owners’ attitudes in 10 key components of NFIB’s optimism index in early September and post- Sept 15.

You have to wonder what the numbers would look like if you quizzed these same owners Oct. 10 after the stock market’s free fall or today following the historic rally.

Note the difference some dramatic economic news can make:

“Dramatic improvements in the percent of owners expecting the economy to improve over the next six months and solid plans to invest in new inventories accounted for the early surge, but the bulk of the gains were erased by events from mid-month on,” said NFIB Chief Economist William Dunkelberg.

Among the findings of note:

Regular small-business borrowers reported that credit is at its tightest point since 2003
Fewer small-business owners are borrowing to build inventory or buy big equipment or buildings
Overall, small-business employment was down slightly in September
Fewer owners are raising prices
Firms reporting lower profits exceeded those with gains by 35 percentage points.

“While Fed policy may be keeping financing costs low, the weak economy has reduced the need for expansion and new equipment and put pressure on cash flows, inducing owners to postpone discretionary capital outlays,” Dunkelberg said.

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