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Economy in Brief

Small Business Optimism Ticked Up
by Tom Moeller March 11, 2008

According to the National Federation of Independent Business (NFIB), small business optimism recovered a modest 1.2% during February after the prior month's 3.0% decline. Optimism remained near 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.

Nine percent fewer respondents expected the economy to improve following sharp declines during the prior four months. None of the respondents expected higher real sales in six months. In addition, none of the respondents indicated that now was a good time to expand the business.

The percent planning to increase employment ticked up slightly from the lowest level since early 2006 and the percentage with one or more job openings reversed all of the prior month's improvement. 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 increase capital expenditures rose m/m to 26% but that remained below the average of 29% last year, 30% in 2006 and 32% in 2005.

The percentage of firms actually raising prices rose m/m but, at 13%, remained below last year's average of 15%. 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 also fell to 22% versus last year's average 23% and 27% in 2006.

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 February January Y/Y 2007 2006 2005
Small Business Optimism Index (1986=100) 92.9 91.8 -5.4% 96.7 98.9 101.6
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