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There is no panic on Main Street, but confidence is dropping, according to the latest CNBC/SurveyMonkey Small Business Survey, released Monday. At a time of growing concerns about a more fragile U.S. economy — with increased stock market volatility, a lingering trade war with China and Federal Reserve policy adding layers of uncertainty — small-business optimism across the country has come down from a record high. The Small Business Confidence Index declined by 1 point from the fourth quarter 2018 level of 59, and it is now four points below its Q3 2018 all-time high of 62. There has been a slight decline in business owners who describe business conditions as good and who plan to hire more full-time staff in the next year. A narrow majority of business owners (53 percent) expect a recession within the next 12 months, according to the survey, mirroring a growing sense of economic anxiety from Wall Street and among individual Americans. The CNBC/SurveyMonkey Small Business Survey, conducted from Jan. 28–Feb. 4, polled more than 2,200 small-business owners.

The longer-term trend is more positive

With two full years of small-business survey data now recorded by CNBC and SurveyMonkey, the longer-term picture shows that confidence remains much higher than it was in 2017. Business owners are becoming more cautious on major decisions but are not in retreat. The percentage of business owners who describe conditions as bad, who expect to decrease staff and who forecast lower revenue all remain at lower levels than they were in the inaugural survey during the second quarter of 2017. "At this point it's just a downtick in confidence," said Jon Cohen, chief research officer at SurveyMonkey. "The consistent gains we saw throughout 2018 have clearly abated, but we'll have to wait and see what subsequent quarters show. It's too early to call the declines a trend at this point," Cohen said. In Q2 2017 the percentage of small-business owners who described conditions as good was 38 percent, while 51 percent described conditions as "middling." This quarter 52 percent of business owners described conditions as good — lower than the 58 percent record in the third quarter last year but still much higher than two years ago. Forty percent of entrepreneurs describe current conditions as "middling." The percentage of business owners who describe conditions as "bad" or who forecast lower revenues remain in a distinct minority.

Small business confidence trends Response Q1 2019 Q3 2018 Q2 2017 Conditions good 52% 58% 38% Conditions middling 40% 34% 51% Conditions bad 7% 8% 11% Revenue will increase 57% 62% 55% Revenue will stay the same 35% 31% 36% Revenue will decrease 8% 7% 9% Hiring will increase 28% 33% 27% Hiring will stay the same 64% 59% 63% Hiring will decrease 7% 7% 8%

"While revenue expectations and hiring expectations have held steady, fears of a recession may affect how business owners think about those decisions going forward. It could point to more volatility in the numbers than we've seen to date," Cohen said. The survey also revealed the waning impact of the Trump tax cuts as part of business optimism. The Tax Cuts and Jobs Act of 2017 passed in December of that year. In the first quarter 2018, 46 percent of small-business owners said government tax policy would have a positive effect on their business over the next year. That is now down to 31 percent, tying the lowest level recorded for that response in the two years of the survey.

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