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Economy in Brief

Small Business Optimism Rose
by Tom Moeller August 11, 2005

The Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) rose a slight 0.3% in July following no change the month prior.

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 slight rise reflected a reversal of the prior month's contradictory indications. In July a greater percentage of firms expected higher real sales in six months and a lower percentage expected the economy to improve.

The job outlook improved as the percentage of firms planning to raise employment recovered half of the prior month's decline an continued an up trend in place since April. The percentage of firms with one or more job openings also rose slightly. 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 fell as did 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 July June Y/Y 2004 2003 2002
Small Business Optimism Index (1986=100) 101.1 100.8 -4.5% 104.6 101.3 101.2
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