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Economy in Brief

Small Business Optimism Back Down, Pricing Power Firm
by Tom Moeller June 13, 2006

Small business optimism in May reversed most of the prior month's recovery with a 1.6% decline, according to the National Federation of Independent Business (NFIB).

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.

Respondents expecting higher real sales in six months dipped but expectations that the economy would improve fell to the lowest level since early 2001.

The percentage of firms with one or more job openings retraced all of an earlier improvement. During the last ten years there has been a 72% correlation between the NFIB percentage and the y/y change in nonfarm payrolls.

The percent planning to raise capital expenditures fell to the lowest percentage (28%) in two years..The percentage of firms planning to raise average selling prices rose to 30% though the percentage of firms actually raising prices slipped. 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 May April Y/Y 2005 2004 2003
Small Business Optimism Index (1986=100) 98.5 100.1 -2.3% 101.6 104.6 101.3
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