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Economy in Brief

Small Business Optimism Down
by Tom Moeller September 11, 2007

The index of small business optimism in August fell to a low 96.3 in August versus 97.6 during July, 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 sharp deterioration during the prior several months but the percentage of firms with job openings improved modestly.

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 was unchanged from a low level in July.

The percentage of firms actually raising prices fell sharply. 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. The percentage of firms planning to raise prices also fell.

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

Outlook and Risks for the U.S. Economy by Federal Reserve Board governor Frederic is available here.

Nat'l Federation of Independent Business August July Y/Y 2006 2005 2004
Small Business Optimism Index (1986=100) 96.3 97.6 0.4% 98.9 101.6 104.6
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