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Economy in Brief

Small Business Optimism Up A Bit
by Tom Moeller June 14, 2005

The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) improved 1.0% in May and recovered less than a third of the prior month's decline. The percentage of firms expecting the economy to improve remained unchanged at a low 5%.

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 a bit as the percentage of firms planning to raise employment rose to 15% but remained down from the 20% of December 2003. The percentage of firms with one or more job openings remained stable at 23% which was up from the low of 18% 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 ticked up to 33% but remained well off the 38% this past December.

The percentage of firms raising average selling prices remained down at 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 May April Y/Y 2004 2003 2002
Small Business Optimism Index (1986=100) 100.8 99.8 -3.5% 104.6 101.3 101.2
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