U.S. small-business optimism unexpectedly slumped in December to a seven-month low as owners grew increasingly concerned about the new economic policy of the incoming Biden administration and the spread of coronavirus infections triggered renewed restrictions.
The National Federation of Independent Business said Tuesday that its index of sentiment declined by 5.5 points to 95.9.
The result was a sharp decline from last month’s 101.4 and weaker than the median forecast of 102 in Econoday’s survey of economists.
“This month’s drop in small business optimism is historically very large and most of the decline was due to the outlook of sales and business conditions in 2021,” said NFIB Chief Economist Bill Dunkelberg.
Nine of the 10 index components declined and only one—the gauge of current inventory—improved. Owners expecting better business conditions over the next six months dropped sharply, falling 24 points to a net negative 16 percent.
The share of owners thinking it’s a good time to expand fell four points to eight percent. Sales expectations over the next three months dropped 14 points to a net negative 4 percent. Plans to grow payrolls fell four points to 22 percent.
“Small businesses are concerned about potential new economic policy in the new administration and the increased spread of COVID-19 that is causing renewed government-mandated business closures across the nation,” Dunkelberg said.