Small Business Earnings Plunge

Weaker sales are forcing owners to cut spending and draw down inventories, the NFIB says.

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Small business earnings plunged last month, forcing many owners to cut spending plans  and draw down inventories, the National Federation of Independent Business reported this week.

The Washington-based lobby group's small-business optimism index remained flat in November, stuck at a 35-year low. Five of 10 index components were either unchanged or declined last month, including the sharpest downturn in earnings since the early 1970s, the report said.

Owners blamed the declines on weaker sales, higher costs and lower selling prices. To cope, most have cut spending across the board, scaling back on hiring  and capital outlays. They're also liquidating inventories. Last month, more owners reported cutting stocks than adding to them, the report said.

"Pricing power has vanished and reports of sales declines are at record high levels," said William Dunkelberg, the group's chief economist. "Profits can't improve in this environment," he said.

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