Small businesses remain pessimistic about economy

By Bernie Becker - 11/13/12 02:25 PM ET

Small businesses became slightly optimistic last month, but still remain largely down on the state of the economy, an industry index said Tuesday.

The National Federation of Independent Business’ optimism index ticked up to 93.1 in October, an increase of 0.3 points.

But the index also found that small-business owners are as uncertain as they’ve ever been about what the future holds, and Bill Dunkelberg, the federation’s chief economist, said "the index still remains in solidly pessimistic—and recessionary territory."

Small-business owners, like many in Washington, are particularly concerned about the looming “fiscal cliff,” the slew of spending cuts and tax hikes set to go into effect at the beginning of next year.

NFIB surveyed owners before November’s election, but Dunkelberg suggested that the results of that election would do little to assuage concerns that a reelected President Obama and Congress can find a solution to the cliff.

“The election is over and Washington looks much like it did on November 5th,” Dunkelberg said in a statement. “The fear of stalemate among the small-business community is palpable, as the looming fiscal cliff and the threat of higher costs and more taxes are very real possibilities come January.”

“Until then,” he added, “not knowing the direction of the economy will always have a dampening impact on spending and hiring.”

The report noted that the index averaged 100 before the recent recession, and has not touched above 95 since the recovery started in July 2009. Still, October’s reading has also only been eclipsed eight times in the three-plus years of the recovery.

According to the index, almost a quarter of small-business owners – 23 percent – didn’t want to predict whether the economic landscape would be better or worse in six months. That is 8 percentage points above the top amount of uncertainty reached during Jimmy Carter’s administration, which was the highest the index found before the most recent recession that hit in 2008.

The index also found that weak sales remain the top concern for about a fifth of small-business owners, and that owners essentially stopped shedding workers in October.