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Economy in Brief

Small Business Optimism Continued Lower
by Tom Moeller July 11, 2006

Small business optimism in June fell another 1.8%, according to the National Federation of Independent Business (NFIB). It was the fourth m/m decline this year.

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 the economy to improve rose slightly m/m but remained near the lowest level since early 2001.

The percentage of firms planning to increase employment slipped back to the lowest level since 2003. The number of firms currently with one or more job openings remained stable but off from the April high. 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 moderately to a new low (27%) since 2003..The percentage of firms planning to raise average selling prices slipped to 29%. The percentage of firms actually raising prices also fell m/m to 23% but remained up versus a 22% average last year. 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 June May Y/Y 2005 2004 2003
Small Business Optimism Index (1986=100) 96.7 98.5 -4.1% 101.6 104.6 101.3
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