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Economy in Brief

Small Business Optimism Lowest Since 1990
by Tom Moeller February 12, 2008

Small business optimism fell a sharp 3.0% last month according to the National Federation of Independent Business (NFIB). It was the largest m/m decline since December 2006 and it pulled optimism to the lowest level since during the recession of 1990.

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.

Twenty two percent fewer respondents expected the economy to improve following declines during the prior three months. Only 9% reported that now is a good time to expand the business.

The percent planning to increase employment fell to its lowest level since early 2006 while the percentage with one or more job openings did recover further after November's sharp decline. 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 planning to raise employment remained depressed.

The percentage of firms planning to increase capital expenditures fell to the lowest level since 2002.

The percentage of firms expecting higher real sales in six months fell to 4%, the lowest level since 2003.

The percentage of firms actually raising prices fell sharply m/m to the lowest level since late 2006. 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 was stable for the third month at the highest level in a year.

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 January December Y/Y 2007 2006 2005
Small Business Optimism Index (1986=100) 91.8 94.6 -7.2% 96.7 98.9 101.6
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