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Economy in Brief

Small Business Optimism Lowest Since 1993
by Tom Moeller December 11, 2007

Small business optimism fell another 1.9% in November after the prior month's 1.1% drop according to the National Federation of Independent Business (NFIB). The decline was to the lowest level since September 1993.

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.

The percentage of firms expecting higher real sales in six months fell to its lowest since 2003.

Respondents expecting the economy to improve fell to its lowest level in over a year.

The percentage of firms expecting to raise employment fell to the lowest level this year. The percent with one or more job openings now was at its lowest since 2003. During the last ten years there has been a 72% correlation between the NFIB percentage and the y/y change in nonfarm payrolls.

The percentage of firms indicating that credit was more difficult to get rose and reversed some of the decline during October.

The percent planning to raise capital expenditures remained near the lows of this cycle..The percentage of firms actually raising prices slipped m/m. 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 rose to its highest level this year.

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

Availability of credit to small businesses is testimony given by Federal Reserve Board Governor Frederic S. Mishkin and it can be found here.

Nat'l Federation of Independent Business November October Y/Y 2006 2005 2004
Small Business Optimism Index (1986=100) 94.4 96.2 -5.3% 98.9 101.6 104.6
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