Small businesses report declining confidence, slow growth

CEOs of small businesses are losing confidence in the U.S. economy and prospects of their own firms, according to the latest results from the WSJ/Vistage Small Business CEO Survey. The May 2016 survey of 654 Vistage members measured the Small Business Confidence Index at 95.9, down from 99.9 one month ago and 108.7 one year ago. 

Other key highlights from the survey include:

Small firms anticipate slow growth. Prospects for economic growth were voiced by 20%, compared to 26% last month and 37% last year. Nearly an equal number expected worsened prospects for the economy in May. This represented a significant decline from a year ago when the favorable expectations were more than five times as high as unfavorable expectations (37% versus 7%).

Fewer firms plan to expand workforce. Across all small firms, 51% expected to increase the number of workers they employed, down from 58% one month ago and 61% one year ago. While expansion was still planned by half of all firms, the May survey recorded the fewest firms since 2013 to plan additional hires. 

Firms have trimmed fixed investment expenditures. Only 38% of small firms planned to increase their plant and equipment expenditures, compared to 43% in April and 47% last May. However, only 14% of firms anticipated that their expenditures would decrease in the next 12 months.

Revenues and profits have stabilized. Growing sales revenues were expected by 69% in May, just below the 70% recorded in each of the past three months. Profits were expected to increase by 52% in May, down from 56% last month and 57% last May. Overall, the data indicate that the majority of small firms anticipate rising profits, but the margin of those profit expectations have continued to shrink.

View the full results and see an interactive tool with the results at vistageindex.com.

Analysis provided by Dr. Richard Curtin, University of Michigan

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