Small-Business Sentiment Tumbles

Wall Street Journal today.

Small-business owner confidence took a header in November, posting one of its largest declines on record, according to data released Tuesday.

The National Federation of Independent Business‘s small-business optimism index plunged 5.6 points to 87.5 last month. The drop puts the index back to readings seen during the last recession.

The report said two major events shaped the November results: the election and superstorm Sandy. To disentangle these, the NFIB separated results from states hit by Sandy.

“What is quite clear from the data is that the election was the primary cause of the decline in owner optimism, not the hurricane, although hurricane effects were apparent,” the report said.

The biggest drag on the top-line index came from huge decline in the subindex covering business-conditions expectations for the next six months. That subindex dropped 37 percentage points to -35%.

In addition, the expected real sales subindex dropped eight points to -5%. The earnings trend index fell six points to -32% in November.

The labor indicators were mixed. The NFIB’s job creation index improved one point to 5%. But owners said they reduced current employment by an average of 0.04 worker per firm.

With sales weakening, few small businesses are able to raise prices. The net share of owners raising selling prices fell five points in November, to 0%.