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Economy in Brief

Small Business Optimism Stable
by Tom Moeller July 12, 2005

The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) remained stable in June with the somewhat improved level in May. The stability reflected contradictory indications of a sharp rise in the percentage of firms expecting the economy to improve but a decline in the percentage expecting higher real sales in six months.

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 deteriorated as the percentage of firms planning to raise employment gave back half of the improvement in May and the percentage of firms with one or more job openings dropped to a nine month low. 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 was stable at a somewhat improved May level of 33%.

The percentage of firms raising average selling prices rose.

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 June May Y/Y 2004 2003 2002
Small Business Optimism Index (1986=100) 100.8 100.8 -2.1% 104.6 101.3 101.2
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