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Economy in Brief

U.S. Small Business Optimism Rose Further
by Tom Moeller October 14, 2008

According to the National Federation of Independent Business (NFIB), small business optimism rose another 2.0% during September to the highest level since February. The rise to an index level of 91.1 added to a gain of 3.3% during August.

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 percent expecting the economy to improve rose again, last month to the highest level since late 2005.

The percentage planning to raise employment dipped slightly to 7%, still near the highest level since February. The percentage of respondents with one or more job openings improved to 18% which was the highest level since June. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.

The percentage of firms actually raising prices fell to 20%, the lowest level since April. During the last ten years there has been a 64% correlation between the y/y change in the producer price index and the level of the NFIB price index. The percentage of firms planning to raise prices also fell further to 24% which was the least since February.

The largest, single most important problems seen by business were poor sales (20%), inflation (16%), insurance cost and availability (10%) and taxes (17%). The latter, however, still was reduced from 27% in early 2007.

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

The NFIB figures can be found in Haver's SURVEYS database.

The Federal Reserve and other central banks announce further measures to provide broad access to liquidity and funding to financial institutions. Visit the U.S. Federal Reserve site here for more info.

Nat'l Federation of Independent Business September August Y/Y 2007 2006 2005
Small Business Optimism Index (1986=100) 92.9 91.1 -4.5% 96.7 98.9 101.6
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