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Small Business Confidence Sinks to Two-Year Low

Small businesses are pessimistic because of lack of demand for their products and expected increases in health care costs.
ECONOMIC WOES Don Olson reads the paper outside of Main Street Station store along Main Street in Grapevine, Texas.
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Thanks to growing economic uncertainty, small-business confidence has fallen to a two-year low, according to new research.

Some 1,700 small business CEOs surveyed in September predict weak economic conditions to carry on in the year ahead, says the Vistage CEO Confidence Index, a quarterly report.

The confidence index was 83.5 in the third quarter of this year, down 20 percent from 105.2 in the first quarter. (The index was 92.9 in the second quarter.)

The major reason CEOs cited for their pessimism? Inadequate demand for their products or services. They also fingered added regulatory burdens and expected increases in health care costs.

Forty percent of the bosses surveyed said economic uncertainty was the biggest issue they're facing.  Thirteen percent cited financial issues, a tie with staffing issues (another 13 percent). Not surprisingly, CEOs surveyed said they were cautious about making new investments and planning hires, though most stopped short of saying they planned to cut back. Just 15 percent said they planned to trim fixed investments, while 10 percent planned to reduce employment.

Nearly 40 percent of companies said they expected revenues to flatline or decline, and 59 percent said they expected prices to remain unchanged. To keep revenues steady without raising prices, half of CEOs said the big problem would be finding and retaining customers and containing costs.

Who's to blame for the economic doldrums? Fully half of the CEOs think it's politics, in general—President Barack Obama, Congress, Democrats and Republicans collectively—for a lack of leadership in Washington. A third (33 percent) said it was the President and his administration's fault, and seven percent blamed Congress alone. 

Last updated: Sep 28, 2011

COURTNEY RUBIN

Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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