Small business optimism, one of the foundations of the Trump-era economic expansion, faded in January for the fifth straight month.
The conservative-leaning National Federation of Independent Business said Tuesday that its optimism index fell to 101.2 in January from 104.4 a month earlier. The three-point decline brings the optimism level to its lowest since before the election of Donald Trump in 2016.
Economists had been expecting a smaller decline to 102.
Political uncertainty has depressed optimism, according to the NFIB.
“Business operations are still very strong, but small business owners’ expectations about the future are shaky,” said NFIB President and CEO Juanita D. Duggan. “One thing small businesses make clear to us is their dislike for uncertainty, and while they are continuing to create jobs and increase compensation at a frenetic pace, the political climate is affecting how they view the future.”
The decline was broad-based. Plans to increase employment fell, job openings declined, the view that now is a good time to expand shrank, and the view that current inventories are too low fell further into negative territory.
Despite the gloomier outlook, small businesses continued to expand, raising wages, hiring more workers, and increasing capital spending. Small businesses added a net 0.33 workers per firm in January, the highest reading since July. Reports of higher compensation rose to a net 36 percent, the second highest level in the survey’s history.