Confidence among companies increases from 13-month low

Posted Oct. 11, 2011, at 8:43 p.m.

WASHINGTON — Confidence among small companies rose in September from a 13-month low, reflecting less pessimism about the outlook for sales and the economy, a private survey found.

The National Federation of Independent Business’s index climbed to 88.9, the first gain in seven months, from August’s 88.1, which was the weakest since July 2010, the Washington- based group said Tuesday in a statement. The gauge averaged 100.7 in the six-year expansion that ended in December 2007.

“About the only good thing to say about it is that it didn’t go down,” William Dunkelberg, the group’s chief economist, said in a statement, referring to the index. “Nothing has transpired to rally confidence that the recovery will pick up speed, now or at any time in the future.”

Companies are reluctant to add workers or accelerate investment while they wait for signs the recovery in the world’s largest economy will be sustained. In this environment, policy incentives such as tax breaks for hiring will “not change the math much” for businesses, Dunkelberg said.

The net share of owners projecting higher sales, adjusted for inflation, rose six points to minus 6 percent. The prior month’s reading of minus 12 was the lowest since March 2009. A gauge of expectations for better business conditions six months from now climbed four points to a net minus 22 percent from a record low in August.

The survey’s net figures are calculated by subtracting the percent of business owners giving a negative answer from those with a positive response, and adjusting the results for seasonal variations.

A gauge of whether small firms think this is a good time to expand increased one point to a net 6 percent. A measure of respondents planning to hire over the next three months fell one point to a net 4 percent. Plans for capital investment also dropped by one point to a net 20 percent.

A measure of earnings trends decreased by one point to a net minus 27 percent, the report showed. At the same time, a net minus 12 percent of small businesses said they expect easier credit conditions, a one-point improvement from the prior month.

Willson Builders Inc. is among small companies keeping a tight rein on payrolls and spending. The Toledo-based construction company is only taking on workers to handle new contracts and has seen its permanent headcount fall by two thirds to about 35 people in the past three years, according to vice president Don Kohntopp. The company has also idled two trucks and one forklift and isn’t buying new equipment.

“We have adjusted the staff appropriately because of the downturn,” Kohntopp said in a telephone interview. “Everything is being watched very carefully, our cash flow is being monitored very closely. We are riding the storm out.”

The NFIB report was based on 729 small business owner respondents through Sept. 29. Small businesses represent more than 99 percent of all U.S. employers and have created 65 percent of new jobs in the past 17 years, according to the Small Business Administration. A small business is defined as an independent enterprise employing up to 500 people.

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