Having soared to all time highs in 2018 cheering Trump's tax cuts, economic confidence among small businesses has hit its lowest level since the 2016 election, according to a new report.
Heading into 2019, small businesses are becoming more cautious about their plans for spending, whether investments or hiring new employees. Some are already reacting to slowing sales, while others are trying to plan ahead and deal with fears of tariffs, volatile financial markets, the government shut down, higher interest rates and other headwinds heading into the new year with some already speculating about a 2020 recession.
According to a monthly survey of 765 small companies by Vistage Worldwide Inc, just 14% expect the economy to improve this year and 36% expect it to get worse. For the first time since the last election, small businesses are more pessimistic about their own financial outlook then they had been in the year prior.
Richard Curtin, a University of Michigan economist stated: "We could be at a turning point. Recessions are not made of one firm collapsing, but of many firms cutting back in marginal ways." And yet, all this flies in the face January's jobs report which saw payrolls rise by 304,000, indicating that jobs still appear to be growing at a healthy clip.
Meanwhile, according to the Vistage Survey, 42% of the surveyed firms said that the Trump administration helped their businesses, down from a high of 52% in January of last year. 34% claimed that the Trump administration had no impact. About one in four small businesses said that the Trump administration had hurt the outlook for their business going forward.
Confirming the shift in sentiment, Bill Visintainer, chief executive of Atlas Welding Supply told the WSJ that "people were inquiring a lot, but they didn’t pull the trigger, not nearly at the rate we saw a year earlier.” Visintainer also says that customers have been taking longer to pay their bills. As a response, he has cut back on the company's spending and delayed purchases of products he needs to deliver gas until customers place orders, instead of steadily keeping inventory in place.
"I hate to lower my expectations," he said, but he had no other choice.
Still, some small businesses are still confident. Southwest Geotechnical LLC in Las Vegas, for instance, is planning to add about 12 employees this year after hiring more than that in 2018. They’re also going to spend about $150,000 on new lab equipment for new employees. Owner Justin Stratton said: "Business is rocking. I am being told by developers that they are looking for a banner year."
But the numbers don't lie: 66% of small firms expect revenue to grow this year according to the survey. While this may seem optimistic, this number is down from 83% in January 2018.
Kenny Rubenstein, the owner of Rubenstein's, a 95-year-old New Orleans based clothing company, said that sales were strong last year but when he placed his orders for fall 2019, he bought only 75% of what his internal reports suggested that he buy.
He said: "I’d rather play it safe at this point. I’m divided right down the middle. Half of me is very positive. Half of me is very nervous."
The owner of Webfoot Painting in Bend, Oregon echoed this sentiments: "It’s batten down the hatches; hold on to your cash. We are scared, but we are not playing scared. We are playing super-conservative with our cash."