After rising to the highest level in nearly three years in November, small business sentiment declined in December, according to the National Federation of Independent Businesses (.pdf). Its small business Optimism Index declined 0.6 points to 92.6 last month, after rising for four months straight. This is disappointing, but isn't cause for concern yet.
Obviously, it would have been nice to see small business sentiment continue to improve without taking a step back. But the good news is that it didn't move backwards much. Here's the Optimism Index chart since 2006:
December's decline was a pretty small tick. The level it's currently at is still above any prior to September 2008. Small businesses aren't suddenly extremely negative about the U.S. economy. Instead, their optimism just isn't improving as consistently as we would like.
One factor driving the decline in sentiment was general business outlook. Near- and longer-term expansion plans both worsened in December. Part of the reason why is that weak sales continued to plague small businesses. Sales worsened in December, which is a little surprising considering all the reports of strong holiday sales. Yet small businesses still reported the best December sales since 2007. Sales expectations were also the highest they've been in three years.