Small business owners seem anything but jolly heading into the holiday shopping season.
The National Federation of Independent Business reports that its monthly small business optimism index in October sank to its lowest level since March, erasing small but relatively steady increases over the past six months. The measure was driven down partly by falling sales expectations as well as a drop in product inventory at small firms.
Bill Dunkelberg, NFIB’s chief economist, pinned much of the decline on the government shutdown early in the month.
“Washington paralysis is never good news for the economy, so it was no surprise that while politicians were arguing over whether or not the government should remain fully operational, small-business optimism measures deteriorated,” Dunkelberg said in a statement.
It is the latest in a series of reports that bode poorly for small businesses heading into the most important shopping season of the year — which already will be the shortest since 2002 (there are only four weeks between Thanksgiving and Christmas this year).
A survey late last month by online small-business directory Manta, for instance, showed that only 13 percent of owners expect higher holiday sales this year than in 2012. An identical survey taken just before the shutdown had that number at 30 percent.
A more recent report by Sageworks, a financial services firm, shows that small businesses are currently suffering the slowest rate of sales growth since the recession. The past two years, Main Street sales have grown at around 7 percent; this year, it’s below 1 percent.
In industries like retail, wholesale and manufacturing, sales have actually contracted over the first nine months of the year.
“Sales growth for businesses with less than $5 million in annual sales is virtually non-existent so far in 2013,” Sageworks researchers wrote in the report, noting that profit margins have remained healthy for now but that “may be difficult to sustain if sales growth does not increase.”
Consumer confidence indices have recently been falling, too, leading analysts to predict a less-than-merry season for retailers of all sizes over the coming months. In fact, Morgan Stanley predicts this year’s final quarter could be the weakest fourth quarter since 2008.
Sprinkle in some additional uncertainty in Washington — particularly another looming budget battle and numerous problems with the health care law — and Dunkelberg says “we shouldn’t expect skies to turn blue any time soon.”