WASHINGTON – Optimism among small business owners nationwide fell last month to its lowest level in 17 years, according to the Small Business Economic Trends report released today by the National Federation of Independent Business.

The policy group’s Index of Small Business Optimism fell 2.8 points in January to 91.8 – the lowest since its 91.4 reading in the first month of 1991 – from the December level of 94.6 points. (Seasonally adjusted; 1986 = 100 points.)

Eight of 10 component indexes declined, with three “mood measures” – “expected business conditions in six months; expected real sales; and the environment for expansion” – accounting for 51 percent of the slide. The business conditions index – the share of respondents who expect the economy to improve – fell 12 points to a seasonally adjusted -22. (The score for each component is the sum of negative responses and positive responses.) The share of respondents who expect real sales to rise fell 2 points to 4. The share who expect to increase employment fell 2 points to 9.

Also declining were respondents’ view of earnings trends, falling 7 points to -27; planned capital outlays in the next few months, falling 5 points to 25; plans to increase inventories, down 1 point to -4; current inventory, falling 1 point to -4; and the belief that now is a good time to expand, falling 5 points to a reading of 9.

Improving last month were the index of current job openings, rising 3 points from its December level to a January reading of 24; and the index of expected credit conditions, improving 1 point to -9.

“Numerically, the index has delivered a recession signal,” the NFIB said in a statement. But, it added, “the job market numbers are much better in the 2008 index than in 1991, a good sign (and inventory investment and capital spending are the same). … What is clear is that the declines did not start until Sept. 19, the point at which the Federal Reserve joined the ‘talking heads’ in the recession talk and made an important move by cutting rates.”

“The index has been sliding since it peaked in 2004 – typical of an expansion that gets tired – as has the overall level of economic activity. Perhaps the economy will slide, rather than plunge, into a recession,” the group added.

“The October NFIB survey anticipated unemployment rising above 5 percent and inflation getting a bit worse in the first quarter. Time will tell – after all, small firms produce only half of the private GDP. Maybe the Federal Reserve will become more optimistic soon and help turn things around.”

The report was based on a survey of 1,845 NFIB members nationwide. According to the group’s Web site, the typical member has a staff of about five and gross sales of about $350,000 per year.

The National Federation of Independent Business is a lobbying group with offices in Washington, D.C., and all 50 state capitals. Its quarterly Small Business Research and Economic Studies date back to 1974. For additional information, visit www.nfib.com.