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Small biz optimism drops
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February 15, 1999: 10:24 a.m. ET
Index slips from highs but capital spending, job outlook remain strong
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NEW YORK (CNNfn) - Small business optimism eased for the first time in three months in January, but the organization responsible for the findings says it's nothing to worry about.
According to the NFIB Education Foundation, an arm of the National Federation of Independent Businesses, the Small-Business Optimism Index fell one point to 100.6 last month.
"Main Street optimism has backed down from the mountain top and is resting on a high plateau," William Dunkelberg, NFIB chief economist, said. "The general view is that things have been going well for so long, they're bound to ease back a bit. Small-business owners aren't painting a doom-and-gloom scenario here. They just sense that the red-hot economy will cool by a degree or two."
The 10-component index, which measures the economic status, plans and expectations of more than 1,500 small firms, saw modest declines in 6 categories. Notably, earnings experienced a slump amid heavy price-cutting. A record 18 percent of those surveyed slashed prices, while only 12 percent raised them.
However, the net number of companies expecting sales to improve during the next six months rose three points to 23 percent and small firms continued to add jobs at an impressive pace. "Hiring" firms outnumbered "firing" firms, with no reduction in reports of unfulfilled job openings. The percentage of small firms planning to add workers during the first quarter exceeds the percentage planning to cut jobs by 17 points.
"While three points shy of the record set in December, that's still a very strong number," Dunkelberg said.
Wage hikes also prevailed in January, as 29 percent of all firms increased salaries in January, up one point from December. Plans to raise wages slipped to 17 percent.
Capital investment plans also remained strong, even though the percentage fell four points from December to 37 percent.
"With hiring and capital spending plans at near record levels, 'slowdown' does not appear to be in the vocabulary of the nation's small-business owners," Dunkelberg said. "Main Street firms are pulling more than their share and will help keep Gross Domestic Product growth in the solid 3-percent range through the first quarter, at least. The good times will keep right on rolling well past Mardi Gras." 
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