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Economy in Brief

Small Business Optimism Drooped
by Tom Moeller April 11 2006

Small business optimism fell 3.4% during March following three consecutive months of sideways movement, according to the National Federation of Independent Business (NFIB). The index drooped last month to its lowest level in three years.

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.

Expectations that the economy would improve fell to the worst level in five years. The percentage of firms with one or more job openings also reversed recent months' gains and the percentage of firms planning to increase employment fell to the lowest since early 2003.

The percent planning to raise capital expenditures fell sharply..The percentage of firms planning to raise average selling prices slipped to 26% while the percentage of firms actually raising prices fell hard to 17%. 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.

Nat'l Federation of Independent Business Mar Feb Y/Y 2005 2004 2003
Small Business Optimism Index (1986=100) 98.0 101.5 -4.4% 101.6 104.6 101.3
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