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U.S. small business optimism fell in October, as business owners worried about the economy’s outlook and scaled back on hiring plans amid a partial government shutdown.
The National Federation of Independent Business said Tuesday that its Small Business Optimism Index fell 2.3 points to 91.6 for October from 93.9 from September. “Since the Washington paralysis could hardly be good news, it would be expected that the optimism measures would deteriorate, and they did,” Bill Dunkelberg, NFIB’s chief economist, said in a prepared statement.
The index offers one of the first readings of how the 16-day temporary government shutdown in October affected Main Street. Turns out many small-business owners, even those with no direct exposure to government contracts, still felt a ripple effect as many consumers broadly pulled back amid the uncertainty.
But Bennett Grove, a small-business owner based in Indianapolis, doesn’t need data to verify what he’s been experiencing for months.
As Day One of the shutdown began Oct. 1, the phones at his two businesses—Junk Dawgs and Moving Dawgs—started to ring less. “Furlough, government shutdown. There’s so much uncertainty wrapped up in that language,” Grove said.
When consumers worry, they scale back on hiring service companies including professionals to haul away and move stuff. “They’d rather do it themselves,” he said.
“When you watch the news, nothing has been resolved,” Grove added. “There’s still a little bit of uneasiness, uncertainty going into winter,” he said.
Many smaller merchants don’t expect business conditions to improve—as the new budget deadline of Jan.15, 2014, approaches. The net percent of owners expecting better business conditions in six months was a net negative 17 percent, 7 points worse than September and 15 points worse than August, according to the NFIB.
Additionally, the political atmosphere was cited as a key reason for Main Street uncertainty and pessimism. Of the 68 percent of owners who viewed the current period as a bad time to expand, 37 percent said it was due to the political climate—a record high level, according to the NFIB.
Numbers from other organizations also suggest an uneven Main Street recovery.
Sales growth for private businesses with less than $5 million in annual sales is virtually nonexistent so far in 2013, according to Sageworks.
Bennett, meanwhile, is a member of a small-business community, Manta.com, which last month found roughly 81 percent of smaller merchants surveyed said they do not plan to hire new employees this holiday season.
While sales going into this holiday season were up 40 percent compared to a year ago, the largest percentage group—also 40 percent—said their optimism about holiday sales this year was unchanged from a year ago.
Manta’s data underscore how the shutdown and recovery since the Great Recession has been uneven, with pockets of sales gains wrapped around stubborn uncertainty.
David Leonardo is chief development officer for Wild Wing Cafe, a restaurant chain with 33 locations across the southeast. He described the shutdown’s impact as “mixed.” While some locations, in fact, reported better business as the chain collectively heads into football season—a popular time for the chain—restaurants near military bases took a hit, Leonardo said.
Grove of Junk Dawgs and Moving Dawgs, founded in 2012, is now are focused are shoring up for winter, when the hauling and moving business is seasonably slower. Both businesses are owned and operated by firefighters and veterans—a group collectively that already had been touched by the shutdown. Said Bennett,” I still fee like not much is settled.”
—By CNBC’s Heesun Wee. Follow her on Twitter @heesunwee
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