SOURCE: Small Business Research Board

February 28, 2008 12:05 ET

U.S. Small Business Confidence Index Drops Nearly 10 Points; Small Business Research Board Study Finds Plans for Decreased Hiring Biggest Decliner in Across-the-Board Drop of All Key Indicators

NORTHFIELD, IL--(Marketwire - February 28, 2008) - Decreases in all key indicators, led by expectations for lower hiring levels, dropped the Small Business Research Board (SBRB) U.S. Small Business Confidence Index (SBCI) to 33.67 during the fourth quarter of 2007, according to the latest report issued today.

The fourth quarter 2007 SBCI of 33.67 was nearly 10 points (or 21.7%) lower than the index of 43 reported for the previous report issued during the Fall of 2007.

More than 950 businesses participated in the nationwide SBRB poll co-sponsored by International Profit Associates.

Small business owners and managers throughout the U.S. reported lower levels of expectations for the next 12 months in all three categories comprising the confidence index.

Only 24% of the respondents indicated they intend to increase hiring during the next 12 months, a decrease of 15 points from the 39% reported during the prior study conducted during the Fall, 2007.

Of the participants, 29% said they believe the economy will improve, 8 points fewer than the last study.

The current report also showed 48% of the businesses are projecting revenue increases, 5 points fewer than the 53% indicated last fall.

The results for the four major U.S. regions mirrored the overall findings. Owners and managers in the Midwest were the most pessimistic, recording a regional SBCI of 27.67 for a decrease of 12 points from the prior period. Small businesses in the Western states were most optimistic with an SBCI of 37 which was 10.67 points lower than in third quarter.

At 33.67, the SBCI is at the lowest level since the SBRB first began reporting a confidence index in the Winter of 2006. When first introduced, the SBCI was set at 52.

"The fourth quarter report is not a good sign given that small businesses together employ the majority of workers in the U.S.," said Gregg M. Steinberg, President of IPA, based in Buffalo Grove, Il. IPA is the largest privately held provider of management consulting services to small and medium-size businesses in North America.

"Nor does the report bode well for the country as a whole since small businesses are traditionally on the leading edge of economic swings with larger businesses trailing," Steinberg continued.

The decline in the confidence of small businesses parallels other economic trends and outlooks.

Consumers, experiencing the squeeze of escalating prices and fewer jobs, are expressing their concern about prospects for continuing cost increases with fewer employment opportunities in the coming months.

Non-farm payrolls recorded a net loss of 17,000 jobs in January as compared to a forecasted increase of 80,000 jobs.

For the most recently recorded months, construction spending, pending home sales and auto sales all were lower than the prior reporting periods. Construction spending decreased 1.1% and pending home sales were down 1.5% in December. Auto sales, which reached 5.5 million units in December, decreased to 5.1 million units in January. The 5.1 million unit report was 100,000 units fewer than the 5.2 million that had been predicted.

Concurrently, the consumer price and producer price indexes rose in January, fueled by higher energy costs and the greatest increase (1.7%) in food prices in more than three years, according to government data.

The Labor Department reported the producer price index, which measures the rate of inflation at the wholesale level, increased by 1% in January. The January consumer price index also showed an increase in costs.

Energy prices were up 1.5% in January, gasoline prices increased 2.9% and wholesale prices for home heating oil jumped 8.5%.

The Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations. The SBRB conducts these studies for the benefit of small business owners and managers. The SBRB also provides opportunities for third parties to gain real time insight into the attitudes of small businesses nationwide through the independently conducted research.

IPA provides directly or through its affiliated companies a comprehensive array of business advisory services, tax and estate planning services or merger, acquisition and other financial advisory services in the United States and Canada. More information about IPA can be found at www.ipa-iba.com.

For more information about this poll, results of previous studies or other matters related to the SBRB, please contact Raymond D. Minkus, (847) 441-4192.

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