Businesses cut spending as sales slip

Dwindling earnings have small businesses owners putting investments on hold.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Emily Maltby, staff writer

Wanted: Your holiday dollars Wanted: Your holiday dollars Wanted: Your holiday dollars
These indie retailers face a make-or-break holiday season as they try to attract buyers worried about their wallets.
Can the markets sustain a stock rally through the end of the year?
  • Yes
  • No

NEW YORK ( -- Sales have come to a standstill at many small businesses, and few owners expect improvement any time soon.

In the latest edition of the National Federation of Independent Businesses's monthly Small Business Optimism poll, the number of businesses reporting higher sales in the past three months fell to the worst reading in the survey's 35-year history. Only 18% of the small business owners surveyed saw increased sales, compared to the 40% who reported lower sales. Half of respondents said their profits were down compared to three months ago.

"Around this time every year, experts predict the holidays won't be great for retailers. This time, they'll be right," said William Dunkelberg, the NFIB's chief economist.

As a result of the poor sales and grim expectations, inventories and capital expenditures also took a hit. For the 18th consecutive month, firms that cut inventory outnumbered those that stocked back rooms. Meanwhile, capital spending plans fell to their lowest level in more than 30 years: Just 21% of reporting business owners plan to expand in the coming months.

"Business owners are not spending money on what they don't need," Dunkelberg said. "They don't need inventory because the inventory they have isn't depleting, and future prospects are low."

NFIB's monthly survey polls a portion of its members, which include small business owners throughout the U.S. This month's results are based on responses from 826 participants.

The report's only silver lining was a slowdown in layoffs. Average employment per firm still declined - 19% of respondents said their reduced their staffing recently, while 9% said they had hired new workers - but at a more gradual pace than in past months.

"Looking forward, small businesses still intend to lay off, with 4% planning to cut rather than add," Dunkelberg said. "But owners may have gotten rid of the bulk of the employees they deemed necessary to control costs. It looks like, come first quarter, we'll see a bottoming-out of actual reductions." To top of page

To write a note to the editor about this article, click here.

QMy dream is to launch my own business someday. Now that it's time to choose a major, I'm debating if I should major in entrepreneurial studies or major in engineering to acquire a set of skills first. Is majoring in entrepreneurship a good choice? More
Get Answer
- Spate, Orange, Calif.

More Galleries
15 top executives with $1 salaries Some CEOs and founders agree to salaries of just $1 a year. But once goodies like bonuses and stock options are added in, some of those executives end up taking home many millions of dollars a year. More
Mercedes SL65 AMG: 621 horses of topless power Turn heads as you blow by traffic in this roadster convertible from Mercedes. More
Where the middle class is most unequal CNNMoney looks at the five states with the biggest differences in middle class incomes. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.