Several surveys and economic reports released in recent weeks show that company owners have more trust in their businesses than the national or local economy, and that they're running their businesses more conservatively in response to uncertainty about overall business conditions.
In a survey by the U.S. Chamber of Commerce and MetLife taken in January, 53 percent of the 1,001 randomly selected small business owners questioned said they believe the national economy is in good shape, down from 58 percent in a survey taken in the last quarter of 2018. Fifty-three percent said their local economy is in good health, down from 56 percent.
A small business index that accompanied the survey fell to 65.6 from 69.3 in the fourth quarter. "The change is largely due to a decline in economic outlook and expectations (both national and local), but small business owners report their fundamental operations remain strong," the chamber and MetLife said.
The monthly report on manufacturing by the Institute for Supply Management, whose members include small businesses, showed that companies' production slowed in February, as did new orders, a sign that output may continue to slow in the months ahead.
Hiring has also slowed, according to the ISM and to a report from payroll provider ADP, which said its small business customers added just 12,000 jobs in February, down from 107,000 in January.
Owners may be responding to forecasts from many economists that growth will weaken in the first quarter because of a slowing global economy, a trade war with China and consumers' increasing caution. There are also forecasts of a slower economy for the rest of the year - the Congressional Budget Office has forecast that the gross domestic product will increase by 2.3 percent in 2019, down from 3.1 percent last year. One reason: The bump up that the economy got from the new tax law in 2018 won't be repeated in the coming year.
Owners may not be worried about the economy; they may just be cautious after having been hurt, or seeing other companies hurt, during the Great Recession. Small business owners have said in previous surveys they'll hold off on hiring and other big investments if they don't have revenue to justify the expansion.
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