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Posted at 07:30 AM ET, 01/10/2012

Small business optimism inches up, but few signs of robust growth in 2012

Small business optimism inched up for the second month in a row, but that’s not a sign that 2012 will be boom times for entrepreneurs, according to the December National Federation of Independent Business Optimism Index.


The group, which surveys its membership about their sentiments each month, said overall optimism rose 1.8 points in December, to 93.8 points total. The index measures aspects such as small business owners’ plans to increase employment or inventories and expectations that the economy will improve.

NFIB chief economist Bill Dunkelberg wrote in the release that many small business owners have improved expectations for real sales gains in coming months. He added that the economy does seem to be slowly recovering, as evidenced by housing starts and other measures.

But in early 2011, a similar gain in the index gave way to a decline by the spring, which means the marginally good feelings small business owners have now are not necessarily here to stay.

“Make no mistake: the economic winter is still here,” Dunkelberg said in the statement. “Similar gains in the early part of 2011 quickly faded, and the [index] s still well below where it should be at this point in the recovery. It is unlikely that growth will be much better than 2011 even with a solid fourth quarter GDP growth.”

The release notes that the index is still 6 points below the pre-recession average and more than 10 points below the same point in the recovery from the 2001 recession, connoting “weak growth.”

A few of the highlights from the release:

●Reports of positive earnings trends were 6 points better in December, at a net negative 22 percent of all owners.

●Over the next three months, 6 percent of owners plan to create new jobs.

●There are still more firms with sales trending down than those that are seeing their sales trend upward. In spite of reports of improving retail sales in the fourth quarter of 2011, 23 percent of owners reported “weak sales” as their top business problem.

●However, expectations for future sales have improved, with a net 9 percent of owners expecting higher real sales.

Last week, payrolls processing company Intuit reported that small businesses created 55,000 new jobs in December and employees worked more hours, according to the company’s own small business index, which measures 70,000 small business employers who use Intuit Online Payroll.

Susan Woodward, an economist who worked on the Intuit survey, echoed the NFIB’s tepid sentiment:

“We’re seeing larger month-to-month changes in seasonally adjusted employment, hours worked, and compensation over the last four months, compared to earlier in 2011,” she wrote. “This indicates greater volatility in the small business indicators, and parallels, with a slight lag, the recent increased volatility in the stock market. All suggest that while a mild recovery is underway, it is fragile because uncertainty is higher.”

By  |  07:30 AM ET, 01/10/2012

 
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