Economic Snapshot: Political climate drives down small business optimism

The 2016 election is already negatively affecting the economy, as a record number of small business owners cite the political climate as a reason not to expand their businesses.

NFIB Small Business Optimism Index

The Index of Small Business Optimism declined two-tenths of a point to 94.4 in August. At this rate, the index remains well below the 42-year average of 98. Owners are refusing to expand, expect business conditions to worsen and are unable to fill open positions.

Five of the 10 index components posted gains, four declined and one remained unchanged. The most dramatic change came from the outlook for business conditions in the next six months, dropping seven points in August.

Setting an all-time high for the survey, 39 percent of business owners cited the political climate as a reason not to expand. Uncertainty about the economy and government policy also hit record highs among small business owners.

According to the survey, 15 percent of owners said finding qualified workers was their biggest problem. Thirty percent said they had job openings they couldn’t fill – the highest percentage since the recovery from the economic downturn.

“There’s a very disturbing picture emerging in the economy,” said NFIB President and CEO Juanita Duggan. “A growing number of small business owners are paralyzed by the political climate. They’re especially reluctant to hire. On the other hand, there’s another group of small business owners who want to hire, but can’t find qualified workers to fill positions.”

Import and export prices

U.S. import prices declined 0.2 percent in August after ticking up 0.1 percent in July, according to the U.S. Bureau of Labor Statistics. This is the first monthly decrease since February, when the index fell 0.5 percent. Over the five months previous to August, import prices increased 3.1 percent.

The decline was driven by lower fuel prices, which decreased for the second consecutive month. The price index for U.S. imports decreased 2.2 percent for the year ending in August, after declining 11.4 percent over the previous 12-month period.

Non-fuel prices recorded no change in August after rising 0.3 percent in July.

Prices for U.S. exports decreased 0.8 percent in August, following a 0.2 percent increase in July. This is the first month drop since the index declined 0.1 percent in March and the largest decline since the index fell 0.9 percent in January.

In August, lower prices for both agricultural and nonagricultural exports contributed to the overall drop in export prices. The price index for U.S. exports decreased 2.4 percent over the past year, the smallest 12-month decline since the index fell 1.7 percent in November 2014.

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