Global| Jun 08 2010U.S. Small Business Optimism Continues To Improve Sharply
by:Tom Moeller
|in:Economy in Brief
Summary
Small businesses are joining in with the broader improvement in the economy. The National Federation of Independent Business (NFIB) reported their May small business optimism index rose m/m to 92.2. It remained the highest level since [...]
Small businesses are joining in with the broader improvement in the economy. The National
Federation of Independent Business (NFIB) reported their May small
business optimism index rose m/m to 92.2. It remained the highest level
since September 2008. During the last ten years there has been an 85%
correlation between the level of the NFIB index and the two-quarter
change in real GDP.
The lift came as an increased percentage of firms expected the economy to improve with higher sales and (much) higher earnings. Firms also expected to add to inventories for the first time since late-2007.
Hiring plans have improved. The percentage of firms with one or more job openings slipped m/m but the percentage planning to lift employment was positive for the first time since September 2008. During the last ten years there has been a 74% correlation between the NFIB employment index and the six-month change in nonfarm payrolls.
Pricing activity improved. The percentage of firms planning to raise prices rose to its highest level since late-2008. The percentage of firms actually raising prices slipped to -15% (indicating deflation). Finally, the percentage planning to raise worker compensation slipped m/m to 4% though that was improved from none in March 2009. During the last ten years there has been a 51% correlation between the six-month change in the producer price index and the level of the NFIB price index.
The most important problems seen by business were poor sales (30%), taxes (22%), government requirements (13%), insurance cost & availability (9%), competition from large businesses (6%) and inflation (4%).
About 24 million small businesses exist in the United States. Small business creates 80% of all new jobs in America and the NFIB figures can be found in Haver's SURVEYS database.
| Nat'l Federation of Independent Business | May | April | March | May '09 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| Small Business Optimism Index (SA, 1986=100) | 92.2 | 90.6 | 86.8 | 88.9 | 86.7 | 89.8 | 96.7 |
| Percent of Firms Expecting Economy To Improve | 8 | 0 | -8 | 12 | -0 | -10 | -4 |
| Percent of Firms With One or More Job Openings | 9 | 11 | 9 | 9 | 9 | 18 | 24 |
| Percent of Firms Reporting That Credit Was Harder To Get | 13 | 14 | 15 | 16 | 14 | 9 | 6 |
| Percent of Firms Raising Avg. Selling Prices (Net) | -15 | -11 | -20 | -22 | -20 | 17 | 15 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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