Global| Nov 11 2008U.S. Small Business Optimism Lowest Since 1975
by:Tom Moeller
|in:Economy in Brief
Summary
According to the National Federation of Independent Business (NFIB), small business optimism collapsed last month. The 5.8% m/m decline to an index level of 87.5 reversed all of the gains during the prior two months and dropped the [...]
According to the National Federation of Independent Business (NFIB), small business optimism collapsed last month. The 5.8% m/m decline to an index level of 87.5 reversed all of the gains during the prior two months and dropped the level of optimism to its lowest level since early 1975.
During the last ten years there has been a 50% correlation between the level of the NFIB index and the two-quarter change in real GDP.
Plans for capital expenditures collapsed with the recent weakness if corporate profits. During the next 3-6 months, plans for spending fell to their lowest level since 1975.
The percent expecting credit conditions to ease fell to its lowest level since 1980 while the percent expecting higher real sales in six months dropped also to its lowest since 1980. Only five percent of firms thought that now was a good time to expend the business, near the lowest since 1982.
The percentage planning to raise employment fell to zero. The percentage of respondents with one or more job openings improved to 14%, the least since 1992. 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 largest, single most important problems seen by business were poor sales (23%), inflation (11%), insurance cost and availability (11%) and taxes (18%). The latter, however, still was reduced from 27% in early 2007.
The percentage of firms actually raising prices fell to 15%, the lowest level since February. During the last ten years there has been a 69% 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 18% which was the least since 2003
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.
Toward A Durable Recovery is last week's speech by Atlanta Fed Bank President Dennis P. Lockhart and it available here.
| Nat'l Federation of Independent Business | October | September | Y/Y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Small Business Optimism Index (1986=100) | 87.5 | 92.9 | -9.0% | 96.7 | 98.9 | 101.6 |
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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