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Economy in Brief

Small Business Optimism Down Further
by Tom Moeller May 11, 2005

The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) fell another 2.6% in April and is off 7.3% from the peak last November. The decline occurred as the percentage of firms expecting the economy to improve collapsed to 5% 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 job outlook brightened only slightly. The percentage of firms planning to raise employment rose one point to 11% but was half the 20% of December 2003. A brighter job market picture came from the percentage of firms with one or more job openings at 23% which was well up from the low of 15% during 2003. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.

The percentage of firms planning to raise capital spending slid to 32%, well off from the 38% this past December.

The percentage of firms raising average selling prices slipped to 23%.

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 April Mar Y/Y 2004 2003 2002
Small Business Optimism Index (1986=100) 99.8 102.5 -5.3% 104.6 101.3 101.2
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