Small Business Optimism Continues to Drop in 2019

According to the National Federation of Independent Business’s (NFIB) monthly Optimism Index, small business optimism is on the downwards spiral in 2019.

But that doesn’t mean many of the nation’s leading economists and small business CEO’s don’t expect to see continued growth in the new year.

So – what does that tell you? Let’s break it down, starting with the basics.

What is the Small Business Optimism Index?

Every month, the NFIB surveys hundreds of small businesses across the US to get a read on industry trends and fluctuations.

Included in their report is the Small Business Optimism Index – a survey that tracks how confident small business owners are in their continued growth, and the overall health of the economy.

The results of the NFIB’s most recent survey shows a drop from 104.8 in November 2018, to 104.4 in December 2018.

While this may not seem like a dramatic change, looking at the bigger picture shows a more alarming story, as it shows that this is the fourth consecutive month that small business optimism has dropped.

This is especially important when you consider that small business optimism was recorded at 108.8 back in August 2018 – the highest recorded level of confidence since 1983.

Does This Indicate a Recession in 2019?

Not likely.

In fact, according to surveys done by the Wall Street Journal (WSJ) and Vistage, the Small Optimism Index results may be somewhat misleading as to what’s in store for small businesses in 2019.

Even though optimism has been dropping over the last few months, we are still experiencing historically high levels of small business confidence in the economy.

And while optimism in the US economy simmers between small business owners, confidence in the continued growth of the businesses they own continues to skyrocket.

According to a survey of small business CEOs conducted by the WSJ, 70% of small business CEO’s predict increased revenue in 2019, and 60% expect higher profits.

So Why the Drop in Economic Optimism?

Economists two somewhat-solid guesses as to reasoning why optimism in the US economy would continue to weaken, while confidence in the growth of their own businesses would continue to climb.

Reason 1:
Trade Wars are Putting Small Businesses On Edge

Since President Trump first issued tariffs on foreign imports of steel and aluminum in an effort to boost the US domestic steel industry, the volley of endless tariffs that continue to follow between the US and now-many different nations has affected small businesses from nearly every industry, including US manufacturing, automotive, construction, and agriculture.

This escalating global trade war is a cause for celebration for few, but a cause for doubt and concern for many others.

Economists point to this knowledge of uncertainty as one of the main reasons why optimism in the US economy would worsen, while confidence in individual growth would continue to rise, as many have not been personally affected by the tariffs in place.

At least, not yet.

Reason 2:
Nothing Great Lasts Forever

You can argue that this answer might seem something of a cop out, coming from our nation’s leading economists (I could’ve said that!), but the message rings true nonetheless.

Keep in mind that small business optimism is still well within the range of one of the nation’s highest-ever levels ever recorded.

This is leading many to simply shrug off the continuing drop in optimism as something that is to be expected not just in terms of the economy, but in life as well.

In short – no positive trend stays positive forever!

Just as every business must face a downturn for every leap in growth, small business optimism was never expected to keep climbing forever.

Sooner or later, a drop now and again is to be expected.

Preparing for the Unexpected

Every small business owner should be watching these monthly reports from the NFIB very closely, and studying the trends not just within their own industry, but in others to always stay one step ahead.

Should this trend in weakening confidence continue, and the months of weakening optimism stretches on, small business owners will need to start preparing to make major changes, both managerially and financially.

For some, this might mean tightening their belts, reducing costs, and streamlining operations.

For others, this might mean increasing sales, and ensuring their businesses are protected while they’re ahead of the game.

And still for others, preparing for the unexpected in 2019 might entail borrowing extra funds in order to secure their business with the cash flow needed for the months ahead.

Stay Optimistic,
& Get Connected

Whatever your way of preparing for the new year might be, the team at National is here to help you stay informed, and keep you growing, no matter what 2019 throws your way.

Call (877) 482-3008 for a free consultation to ask how we can help prepare you for the new year.

Or, fill out our 60-second application by hitting the link below, and we’ll call you in a matter of minutes to answer any questions you might have, and prepare your business for the new year.