Small Biz Confidence Drops Amid Government Shutdown

Only 36% Of Owners Feel Economy Improving

Small Business ConfidenceConcerned by the wrangling in Washington, small business owners' confidence in the American economy dropped to a nine-month low in October. That's according to a new survey from Vistage International Inc. and The Wall Street Journal, which reported that only 36% of owners feel the economy is improving, down 11 percentage points from September.

As telling, the survey's owner optimism index dropped from a record-high of 105.3 in September to 97 this month. While that's up from the 95.3 reading a year ago, it's a downward departure from the rest of 2013's readings, which have been above 100 – the index's baseline score – since February. Conducted between October 7 and October 16, the survey of 692 businesses with less than $20 million in annual revenue found that just 21% of owners expect economic conditions to improve next year, down from 30%.

Analysts said the government shutdown played a central role in driving down confidence. Richard Curtin, a University of Michigan researcher who analyzed the October survey results, told The Wall Street Journal that it was "troublesome" that Congressional impasses were causing economic uncertainties. The assessment that the angst in Washington contributed to the sentiment slip was evidenced, too, by the fact that confidence dropped most precipitously among federal contractors – all the way down to 89.4, compared to 99.1 among firms that conduct no business with the federal government.

Meanwhile, a separate survey from the Principal Financial Group also found apprehension among small business owners. While two-thirds reported that they have surplus capital, 75% said they aren't spending the cash, primarily because of concerns over the economy and health-care costs.