With the stock market falling and business outlook, the optimism of small and medium-sized businesses is shaking as the stock market falls.
The National Federation of Independent Businesses (NFIB) Optimism Index, which measures the sentiment of small business owners, fell 2.1 points in February. The group's uncertainty index registered the second highest reading ever.
12% of business owners reporting a good time to invest and expand have fallen 5 percentage points since January. This is the biggest monthly decline in five years.
According to a NFIB study, small businesses are dealing with vulnerable economic situations by increasing prices. The percentage of owners' prices increased by 10% in February to the highest level in about four years, while stock prices fell 10%.
The decline in emotion among employers reflects a decline in consumer sentiment in February.
The University of Michigan reported that it will slide 10% of consumer sentiment from January. Expectations for both individual finances and short-term economic outlook fell by about 10%, while consumers' long-term expectations were back by 6%.
Commerce Department data shows that consumers drastically rebounded their spending in January, with personal consumption spending down $31 billion or 0.2%.
January's first number was the first in two years when consumer spending fell each month rather than simply slowing down.
The market has also been struggling in recent weeks. The Dow Jones Industrial Average for large US stocks fell more than 200 points in early trading Tuesday, dumping more than 6.5% of its value over the past month.
The S&P 500 index has exceeded 7.5% in the past month, with the Russell 2000 index, a US small business, down more than 10%, and the technology-rich NASDAQ, down more than 11%.
Over the past two weeks, the trigger for the decline in stock values appears to have been uncertainty about tariffs. The Trump administration announced tariffs on multiple occasions, then partially or entirely overturned the order, leading to retaliation measures from top trading partners in China and Canada.
China has released two tariffs on US durable goods and raw materials, and Ontario, Canada, levied electricity charges on three US provinces on Monday. Industry experts say the impact of the dollar on Canadian electricity tariffs is moderate.
Under policy uncertainty, several macroeconomic warning signs are flashing. Inflation in the consumer price index rose from an annual increase of 2.4% in September to 3% in January as the Federal Reserve began cutting interest rates.
The Atlanta Federal Reserve forecasts a contraction of 2.4% of GDP in the first quarter, with some commentators warning about the outlook for a recession. Despite many forecasts for the recession over the past two years, the overall macroeconomic conditions have been strong, selling GDP growth and low unemployment until the end of last year.
