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Time for a New 'Pessimism Index'?

Mark Marich

At the beginning of 2011, PDE checked in on the monthly Small Business Optimism Index to find that small business owners were “stubbornly cautious.” Fast-forward to the midpoint of the year--in the dog days of summer—and the feelings haven’t seemed to change at all.

According to the latest figures from the National Federation of Independent Businesses (NFIB), optimism dropped for the fifth straight month and is rapidly approaching 2009 levels.

“Given the current political climate, the protracted debate over how to handle the nation’s debt and spending, and the now this latest development of the debt downgrade, expectations for growth are low and uncertainty is great,” said NFIB Chief Economist Bill Dunkelberg. “At the two year anniversary of the expansion, the Index is only 3.4 points higher than it was in July 2009. And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the ‘Small-Business Pessimism Index’ from now on.”

The silver lining in those January 2011 figures was that small business owners expected better business conditions in six months. Unfortunately, that glimmer of hope for the future has faded significantly—with the six-month forecast dropping 25 percentage points in the latest figures.

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