The latest readings from consumers and small business owners indicate economic sentiment isn’t improving, despite signs of a factory rebound and less gloom on the labor front.
On Tuesday, the National Federation of Independent Business said its optimism index for small business owners fell back in February to its December reading of 88.0, and the IBD/TIPP Economic Optimism Index dropped 3% to 45.4 in March, well below its average of the past year.
Whats behind the setback? For tiny firms, it is the lack of customers. Poor sales was cited as the top problem among small-business owners. For consumers, job jitters and the lack of vigor in the economy are contributing to the gloom. Households also think their personal finances are worsening.
Uncertainty breeds inertia. Consumers wont spend if they arent sure theyll have a paycheck down the road. And businesses wont hire or expand operations if they dont expect sales growth. Both consumer demand and business investment are needed for the U.S. recovery to gain traction.
So far, Washington and its stimulus policies haven’t done much to break the doldrums. Recent surveys show both consumers and small business owners are disappointed in government policies or dont expect them to help much.