Sales expectations low nationwide, but owners expect better business over next six months
Small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months.
The Optimism Index has fallen 13.6 points over the last two months, with nine of 10 Index components declining in April and one improving, according to a news release by the National Federation of Independent Business .
“The impact from this pandemic, including government stay-at-home orders and mandated non-essential business closures has had a devasting impact on the small business economy,” NFIB Chief Economist William Dunkelberg said in the prepared statement. “Owners are starting to benefit from the PPP and EIDL small business loan programs as they try to reopen and keep employees on staff. Small business owners need more flexibility, though, in using the PPP loan to support business operations and liability protection so that all these efforts to support small businesses are not ultimately lost in costly litigation.”
Spotlighting small business owners’ need for more flexibility is that real sales expectations in the next three months declined 30 points to a net negative 42%, the lowest reading in the survey’s 46-year history. The second-lowest reading was net negative 24% in April 1980. A net negative 11% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 19 points from March.
According to the news release, the NFIB Uncertainty Index fell 17 points in March to 75, with most owners quite certain that the economy will weaken in the near-term. However, reports of expected better business conditions in the next six months increased 24 points, rebounding from a 17-point decline in March. Owners’ optimism about future conditions indicates they expect the recession to be short-lived.
However, Dunkelberg said the full force of the recession has not yet been felt yet, especially "as programs such as PPP encourage firms to maintain employment even as the government shutdown reduces business activity."
He said: "A large percentage of the unemployed expect to be rehired as the economy opens back up, but the picture is further confused by unemployment benefits that for many exceed previous pay. Small business owners are starting to rehire laid-off employees as states lift business restrictions and small business loans are hitting bank accounts.”