The National Federation of Independent Business (NFIB) this morning reported a decline of 1.3 points in its small business optimism index, from 90.8 in February to 89.5 in March. The NFIB noted that the index has averaged 90.7 since the U.S. economic recovery began in July 2009, which puts the March index reading below the mean for this period.

The NFIB’s chief economist said:

After another false start, small-business confidence has sputtered and stalled again. For the sector that produces half the private GDP and employs half the private sector workforce — the fact that they are not growing, not hiring, not borrowing and not expanding like they should be, is evidence enough that uncertainty is slowing the economy. Virtually no owners think the current period is a good time to expand, because they simply don’t know what the future holds. So why invest? And with the lack of any sustainable fiscal policy or a federal budget, no one’s banking that Washington will be at forefront of any meaningful change. Overall, it appears that there will be little growth coming from the small business half of the economy; as the world economy slows, even big business may suffer.

More than 75% of business owners surveyed expect business conditions for the next six months to remain as they are or get worse.

There was a bit of good news. For the fourth consecutive month, job growth was positive, even if by a very small amount. Earnings and wages also improved, with 16% of owners reporting that employee compensation rose in March.

On a seasonally adjusted basis, a net negative 1% of business owners were able to raise prices. Some 17% of owners expect to raise their prices over the next few months.

The biggest drags on independent businesses, according to the survey, were taxes and regulations (noted by 23% of respondents) and red tape (noted by 21%).

With virtually no growth expected over the next six months and hiring and wages rising only slowly, the nation’s small businesses are unlikely to contribute much to the growth of U.S. gross domestic product. Continuing paralysis in Washington and increasing austerity will only make the situation worse.

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