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Economy in Brief

Small Business Optimism At 20 Year High
by Tom Moeller December 14, 2004

The Small Business Optimism Index for November published by the National Federation of Independent Business (NFIB) surged 3.7% to 107.7 in November, the highest level in twenty years.

During the last ten years there has been a 68% correlation between the level of the NFIB index and the two quarter change in real GDP.

The percentage of firms expecting the economy to improve ballooned to 47%, the highest level since last year and the percent of firms planning to raise employment rose to 19% near last year's high. During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.

An elevated 35% of firms expected higher real sales in 6 months. The net of firms expecting higher earnings this quarter was stable at -7 and sustained the recent sharp improvement.

The percentage of firms raising average selling prices fell to 18%, well below the averages for 2Q & 3Q.

About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

Nat'l Federation of Independent Business Nov Oct Y/Y 2003 2002 2001
Small Business Optimism Index (1986=100) 107.7 103.9 2.3% 101.3 101.2 98.4
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