Small-business emotions falls as economic expectations slide sharply

It’s the fifth month in a row without an increase for the index

Small-business sentiment fell again in June as business owners grew increasingly frustrated with Washington gridlock.

The monthly sentiment tracker from the National Federation of Independent Business ticked down 0.9 points to 103.6, the fifth-straight month of declines or unchanged readings. 

The index now sits halfway between its pre-election reading of 98.4, and 105.8, the level to which it surged after the upset election of Donald Trump.

Economists surveyed by Econoday had forecast no change in June.

Sentiment has “sustained” that post-election surge, NFIB said in a release, but warned that small business owners are losing patience with policymakers’ inability to pass the health care and tax reform legislation they want.

“Gridlock is driving down small business optimism, which will eventually drive down the economy,” the lobby group wrote.

Jim O’Sullivan, chief U.S. economist for High Frequency Economics, had a slightly different take. 
“Indeed, the index has been too high to be credible in recent months,” he wrote. O’Sullivan also noted that “the NFIB index has tended to weaken in June in recent years, suggesting seasonal adjustment problems.”

Despite the complaints about policy, there are some silver linings in the details of the June report. For one, while the net number of owners unable to find qualified workers for open positions declined, it remained high. Many economists believe there’s a connection between that gauge and wage inflation in the workforce.

And, as Pantheon Macroeconomics Chief Economist Ian Shepherdson wrote on Tuesday, “the key number in this report is capex intentions, which rose 2 points to 30, the highest reading since September 2007.” Those warm intentions could translate into stronger capital spending in the coming months, Shepherdson added.

On Tuesday, the Labor Department reported that hiring surged in May, touching one of the highest levels on record.

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