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Economy in Brief

Small Business Optimism Down, Pricing Firm
by Tom Moeller December 13, 2005

The index of small business optimism from the National Federation of Independent Business (NFIB) fell 2.4% last month and reversed much of October's improvement.

The decline was due to fewer (11%) firms expecting the economy to improve. Plans for adding to employment fell to 13% from the high 17% of the last three months but the number of firms with job openings increased to the cycle's high of 24%. The percentage of firms planning to raise capital expenditures surged to 34%, the highest since March.

During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.

The percentage of firms planning to raise average selling prices rebounded to 33%, the highest level in over twenty years. The percentage of firms actually raising prices also rose. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.

About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

The latest press release from the NFIB is available here.

Nat'l Federation of Independent Business Nov Oct Y/Y 2004 2003 2002
Small Business Optimism Index (1986=100) 101.2 103.7 -6.0% 104.6 101.3 101.2
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