Small business optimism collapsed unexpectedly in December

Small business optimism in the US unexpectedly fell in December to its lowest level in seven months as owners became increasingly anxious about the incoming Biden administration’s New Economic Policy and the spread of the coronavirus contagion, leading to renewed restrictions.

The National Federation of Independent Business said on Tuesday that its sentiment index fell 5.5 points to 95.9.

The result was a sharp drop from 101.4 last month and weaker than the median forecast of 102 in an Econoday survey of economists.

“The drop in small business optimism this month has been historically very large, with most of the drop due to sales forecasts and business conditions in 2021,” said Bill Dunkelberg, chief economist at NFIB.

Nine of the index’s ten components decreased and only one improved – the current stock gauge. Landlords expecting better working conditions over the next six months fell sharply, dropping 24 points to a net negative 16 percent.

The share of owners who thought the time was right to expand fell by four points to eight percent. Sales forecasts for the next three months fell 14 points to a net negative 4 percent. Plans to raise salaries fell four points, to 22 percent.

“Small businesses are concerned about the potential new economic policy in the new administration and the increasing spread of COVID-19 causing renewed government-imposed business closures across the country,” Dunkelberg said.

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