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Economy in Brief

Small Business Optimism Extended Decline, Pricing Up
by Tom Moeller April 12, 2005

The March Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) fell 1.1% from February and is down 4.8% from the peak last November. The percentage of firms expecting the economy to improve fell to 16% versus 47% in November.

During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.

The percentage of firms raising average selling prices jumped to 25%.

The percentage of firms planning to raise employment fell to 10% though the percentage of firms with one or more job openings held steady at 24%, the highest level since 2001. During the last ten years there has been a 67% correlation between these hiring plans and the three month growth in nonfarm payrolls.

The percentage of firms planning to raise capital spending improved to 36% and continued a recent trend of improvement.

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 Mar Feb Y/Y 2004 2003 2002
Small Business Optimism Index (1986=100) 102.5 103.6 0.0% 104.6 101.3 101.2
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