by Calculated Risk on 9/14/2010 10:08:00 AM

From NFIB: Small Business Confidence Remains Low

The National Federation of Independent Business Index of Small Business Optimism gained 0.7 points in August*, rising to 88.8. Most of the improvement was accounted for by gains in expected real sales and expectations for business conditions six months out, the two components that lowered the index in July. But despite their improvements, both measures are still in recession territory.

“Small business owners are expecting sub-par growth in the second half of 2010,” said Bill Dunkelberg, NFIB’s chief economist.

On employment:

Average employment growth per firm has been negative since April of 2007 and remained negative for 10 of the 12 following quarterly (first month in each quarter) readings. August brought no improvement, with reported job loss averaging negative 0.3 employees per firm (seasonally adjusted).

On capital spending:

The frequency of reported capital outlays over the past six months fell one point to 44 percent of all firms, again hitting the 35-year record low. ... Seventy-three percent of all owners said the current period was NOT a good time to expand.

And the key problem:

“What businesses need are customers, giving them a reason to hire and make capital expenditures and then they may have the need to borrow to support those activities,” said Dunkelberg.

Note: Small businesses have a large percentage of real estate related companies.

The key problem remains excess capacity - and a lack of customers. There is no reason to invest and hire until business picks up.