Recent Updates

  • Mexico: Service Sector, Retail and Wholesale Trade (Mar)
  • Macao: MICE Industry (Q1)
  • UK: Average Precipitation, Motor Vehicle Production (Apr)
  • Serbia: Bank Claims, Banking Survey (Apr)
  • Italy: ISTAT Business & Consumer Survey (May-Press)
  • more updates...

Economy in Brief

U.S. Small Business Optimism Lowest Since 1975
by Tom Moeller November 11, 2008

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
large image