Small business owners growing more pessimistic

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Small business owners grew more pessimistic about the outlook for the economy during September as employment and sales remained weak.

The National Federation of Independent Business (NFIB) said on Tuesday its optimism index fell 0.1 point to 92.8 last month.

The decline is a sign that the U.S. economy is taking a hit from uncertainty over the possibility of tax hikes and government spending cuts next year, said William Dunkelberg, chief economist at the NFIB.

“Owners are in maintenance mode -- spending only where necessary and not hiring, expanding or ordering more inventories until the future becomes more certain,” Dunkelberg said.

Dunkelberg said uncertainty over the outcome of the upcoming Presidential election is also probably hurting sentiment.

The U.S. economy has grown at a lackluster pace this year, which has reduced President Barack Obama's chances of winning the November 6 election. Opinion polls point to a very tight race between Obama and Republican challenger Mitt Romney.

And looming over the economic outlook, the federal government is scheduled to tighten its belt severely in January unless lawmakers pass an alternative plan.

The survey did have some bright spots. The number of owners who believe this is a good time to expand their companies rose 3 percentage points. And the number of owners who expect business conditions to improve in six months gained 4 points.

But the number of business owners who plan to create jobs fell 3 points, while the number who plan to reduce their payrolls rose 2 points. More than a fifth of the survey's participants said weak sales are their biggest business problem.

The survey’s findings are in line with results from other small business surveys that show business owners are cautious.

The payroll service company ADP said last week that small businesses slowed their pace of hiring during September. There have been mixed readings on how much owners are willing to borrow, but the conflicting signals do point to small companies being very careful about spending for hiring or expansion.

The Associated Press and Reuters contributed to this report.