Survey: Small businesses cynical

WASHINGTON — U.S. small-business owners were more pessimistic in March than in February, according to a survey of companies released Tuesday by the National Federation of Independent Businesses.

The NFIB's index fell to an eight-month low of 86.8 from 88, with only one of 10 components improving. The index has been below 90 for 18 consecutive months now, having hit a cyclical low of 81 in March 2009.

"Something isn't sitting well with small-business owners," said Bill Dunkelberg, chief economist for the lobbying group. "Poor sales and uncertainty continue to overwhelm any other good news about the economy."

The survey "suggests the small-business sector is still contracting, even as the economy as whole is expanding," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics.

"Economic recovery has benefited larger businesses more than smaller ones," wrote John Ryding and Conrad DeQuadros, economists for RDQ Economics.

Indeed, surveys of larger companies show much more optimism about the economy.

The Business Roundtable and Conference Board CEO surveys, for instance, indicate greater confidence about the recovery, increased sales, and the need to expand. Surveys done by the Institute for Supply Management also are more upbeat than the NFIB survey.

The gap between the NFIB and ISM surveys is the largest on record.

Some economists surmise that the gap between the NFIB and the other sources may indicate that small businesses are being left behind in the recovery — perhaps because of credit problems, perhaps because they are less exposed to booming export markets.

Most of the official economic data comes from surveys of larger companies, in large part because they are more stable and thus easier to survey.

"This is another piece of evidence suggesting that the official payroll data are overstating the degree of improvement seen in recent months," wrote Joshua Shapiro, chief economist for MFR Inc.

However, economists at Goldman Sachs note that "the strong upturn in employment as measured in the household survey since year-end 2009 does challenge the persistent pessimism of the NFIB survey." The household survey does not have a large-firm bias, and it has reported 1.1 million more people were working in March than in December.

The NFIB survey may be reflecting political — not economic — angst, said Tony Crescenzi, a strategist for Pimco. Government policies, which have favored small business for a decade, have turned more negative, he said.

According to the NFIB's latest survey, most owners think business conditions will not improve in the next six months, few are hiring, and fewer than usual are investing in their business.

Sales were very weak. A net negative 25 percent of firms reported higher sales in the past three months, up 1 point from February.