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Economy in Brief

Small Business Optimism Improved
by Tom Moeller February 13, 2007

Small business optimism in January rose for the first month in three. The 2.5% increase recouped only a piece of the 3.2% December 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 the economy to improve improved after December's sharp deterioration. The percentage of firms with job openings also improved to the highest level since last April.

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 also improved and more than made up the sharp deterioration during December.

The percentage of firms actually raising prices recovered about half of the December decline. 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.

Globalization and the Benefits of Trade from the Federal Reserve Bank of Chicago is available here.

Nat'l Federation of Independent Business January December Y/Y 2006 2005 2004
Small Business Optimism Index (1986=100) 98.9 96.5 -2.2% 98.9 101.6 104.6
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