Tag: NFIB Small Business Optimism Index

Monday Economic Report – January 20, 2015

Here is the summary for this week’s Monday Economic Report: 

Financial markets around the world continued to react to the softening global economic environment. In particular, foreign exchange markets were rocked by news that Switzerland would no longer support its cap on the franc, where that currency has been seen as a safe haven, particularly against the euro. Almost immediately, the Swiss franc appreciated sharply against the euro and other currencies. For its part, the euro has continued to depreciate against the U.S. dollar, with one euro selling for $1.1581 on Friday. This was down $1.3927 on March 17, the high point of 2014, representing an appreciation of more than 17 percent for the U.S. dollar against the euro. These developments could hurt the ability of manufacturers in the United States to grow exports. (continue reading…)

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Small Businesses Ended the Year on a High Note

The National Federation of Independent Business (NFIB) said that optimism soared in December, ending the year on a high note. The Small Business Optimism Index rose from 98.1 in November to 100.4 in December, its highest level since October 2006. Moreover, sentiment has increased significantly since earlier in the year, when the index bottomed out at 91.4 in February. Historically, the small business sector has expanded strongly when the Optimism Index has exceeded 100, so this is an important threshold. As such, the findings were similar to the latest NAM/IndustryWeek survey, which reported 91.2 percent of manufacturers being positive in their outlook in December. (continue reading…)

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NFIB: Small Business Optimism Hit a Pre-Recessionary High in November

The National Federation of Independent Business (NFIB) said that small business sentiment reached a pre-recessionary high in December. The Small Business Optimism Index rose from 96.1 in October to 98.1 in November, its highest level since February 2007. This is a significant milestone, particularly given the fact that smaller firms have struggled much longer than their larger counterparts to see progress in terms of activity and outlook. Along those lines, the index remains below 100, a level that would indicate strong growth in the sector. Still, this latest data suggests movement in the right direction. (continue reading…)

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Monday Economic Report – November 17, 2014

Here is the summary for this week’s Monday Economic Report: 

Manufacturers produced $2.085 trillion in value-added in the second quarter, according to new data from the Bureau of Economic Analysis. That figure is continued evidence that the manufacturing sector has a significant impact on economic activity, accounting for 12 percent of GDP. Moreover, the sector added 0.81 percentage points to second-quarter real GDP growth, which rebounded by 4.6 percent after weakness in the first quarter. This suggests that manufacturers had an outsized impact on economic growth in the second quarter, with only the professional and business services sector having a larger contribution to real GDP. (continue reading…)

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NFIB: Small Business Owners More Optimistic, with Lingering Concerns

The National Federation of Independent Business (NFIB) said that its Small Business Optimism Index rose from 95.3 in September to 96.1 in October, rebounding back to where it was in August. Small business leaders have become more confident as the year has evolved, with the index moving higher after bottoming out at 91.4 in February. Since the first quarter, the Optimism Index has averaged 95.7. At the same time, small business owners remain somewhat anxious, with the index remaining below the key threshold of 100, the level that would indicate strong growth for the sector. The index has now been below 100 since October 2006. (continue reading…)

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NFIB: Small Business Optimism Edged a Little Lower in September

The National Federation of Independent Business (NFIB) said that small business sentiment edged lower in September. The Small Business Optimism Index dropped from 96.1 in August to 95.3 in September. Still, small business owners’ sentiment has largely improved after waning in the first quarter of 2014, when the index bottomed out at 91.4 in February. Nonetheless, after peaking at 96.6 in May (its highest level since September 2007), the index has eased somewhat. This suggests that small firms continue to have anxieties about economic growth despite recent progress. Moreover, the index remains below 100 – a level that would indicate health in the small business sector.

Indeed, many of the underlying data points were softer in September. For instance, the net percentage of respondents expecting sales to be higher in the next three months has fallen from 15 percent in May to 5 percent in September. Along those lines, the net percentage planning to hire more workers in the next three months has declined from 13 percent in July (a seven-year high) to 9 percent in September. In addition, capital spending plans over the next three to six months also dropped slightly, down from 27 percent in August to 22 percent in September.

Interestingly, the percentage of small business owners saying that the next three months were a “good time to expand” improved, up from 9 percent in August to 13 percent in September (its highest level since December 2007, the first month of the recession). As such, these data definitely have a nuanced perspective, showing both improvements in the economy and persistent challenges. Economic worries and the political climate were the main reasons noted for those suggesting that it was not a good time for expansion. Regulations were the “single most important problem,” cited by 22 percent of respondents. This was followed by taxes (21 percent) and poor sales (14 percent).

Chad Moutray is the chief economist, National Association of Manufacturers. 

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NFIB: Small Business Optimism Ticked Higher in August

The National Federation of Independent Business (NFIB) said that small business sentiment ticked higher in August, rising to its second-highest level in seven years. The Small Business Optimism Index increased from 95.7 in July to 96.1 in August. After peaking at 96.6 in May, the index eased somewhat in June, and August’s reading suggests that confidence has once again begun to climb back. Over a longer time frame, it is clear that small business owners have become more positive over the past six months, with the index at just 91.4 in February.

With that said, the underlying data were slightly mixed. On the positive side, the percentage of small business owners with job openings right now increased from 24 percent to 26 percent, continuing an upward trend. Along those lines, the percent planning to make capital expenditures over the next 3 to 6 months rose from 23 percent to 27 percent, its fastest pace since November 2007 (the month before the official start of the recession). On the topic of inflation, pricing pressures have decelerated a bit, with the net percentage of those predicting price increases over the next 3 months declining from 22 percent to 19 percent.

Yet, the report also reflected some soft spots. For instance, sales expectations over the next 3 months dipped from a net percentage of 10 percent to 6 percent. In addition, the percentage suggesting that the next 3 months were a “good time to expand” was off slightly from 10 percent to 9 percent. Nonetheless, the outlook data do reflect an upward trend overall, rising from 6 percent in February. For those saying that it is not a good time for expansion, the top reasons cited continue to be economic conditions and the political climate. Taxes were the listed as the “single most important problem” by 24 percent of respondents, followed by government regulations (19 percent), poor sales (13 percent) and labor quality (11 percent).

Chad Moutray is the chief economist, National Association of Manufacturers. 

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NFIB: Small Business Confidence Edged Higher in July

The National Federation of Independent Business (NFIB) said that small business confidence edged higher in July, bouncing back after dropping slightly in June. The Small Business Optimism Index increased from 95.0 in June to 95.7 in July. While the index remains below the 96.6 reading observed in May (which was its highest level since September 2007), it has averaged 95.6 over the past four months (April to July). This represents an upward trend, with the first quarter (January to March) averaging 93.0. As such, it suggests that small business owners have become somewhat more positive over the past few months.

Much of the data supports this finding. The percentage of respondents saying that the next three months are a “good time to expand” increased from 7 percent to 10 percent, matching the level observed in May. Net sales expectations were off marginally, down from 11 percent to 10 percent. However, these data also suggest that the sales outlook has improved so far in 2014 with a year-to-date average of 10.9 percent, up from an average of 3.8 percent for all of 2013. In July, capital expenditure plans (up from 24 percent to 25 percent) were also higher.

Nonetheless, the Small Business Optimism Index remains below 100, indicating that the sector continues to experience subpar growth and sentiment. Survey respondents suggest that economic conditions and the political climate are factors that discourage expansion. Along those lines, taxes and government regulations are cited as the top problems faced by small business owners, with each garnering 22 percent. These are followed by poor sales (13 percent) and the inability to attract workers (10 percent).

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Monday Economic Report – July 14, 2014

Here is the summary for this week’s Monday Economic Report:

Just a few data releases came out last week, so our view of the economy changed little from the previous week. Manufacturers continue to wrap their heads around the fact that growth in the early months of 2014 has been more disappointing than originally anticipated, but at the same time, they are cautiously upbeat about the second half of the year. The sharp 2.9 percent drop in real GDP in the first quarter clearly altered perceptions about the economy, with business leaders struggling to try to figure out how that impacts their prospects for the rest of this year. For instance, was the drop in activity mostly due to severe weather, or were there larger doubts about the economy at play?

For their part, business economists have lowered their projections for real GDP growth in 2014, from 2.5 percent in June (before the GDP revision) to 1.6 percent. At the same time, real GDP is expected to bounce back in the second quarter, with a median growth estimate of 3.0 percent, according to the National Association for Business Economics (NABE). (My own projection would be somewhat higher than that, perhaps around 3.5 percent.) Moreover, almost 60 percent of economists surveyed felt that the odds of a recession in 2014 or 2015 were less than 10 percent. In addition, more than half of the NABE respondents felt that the Federal Reserve would start raising short-term interest rates in the first six months of 2015.

Along those lines, the minutes from the June 17–18 Federal Open Market Committee (FOMC) meeting suggest that the Federal Reserve Board continues to also see improvements in the U.S. economy in the months ahead, even as sufficient “slack” remains in the labor market. While the Federal Reserve projects real GDP growth of 3.0 to 3.2 percent in 2015, it also intends to maintain its highly accommodative stance to monetary policy for the foreseeable future.

The FOMC reported plans to end its purchases of long-term and mortgage-backed securities in October, which mainly confirmed existing conventional wisdom, and it devoted a lot of discussion at its meeting to its exit strategy. The timing of the Federal Reserve’s move toward “normalization” in its policies has already become a focus of debate, with the guessing game now being when the increase in federal funds rate will begin. With pricing pressures accelerating of late, some will suggest that the Federal Reserve should move faster in its efforts to raise short-term rates, especially if core inflation starts to consistently exceed the stated FOMC goal of 2 percent on an annual basis.

Meanwhile, the National Federation of Independent Business (NFIB) reported that small business confidence declined somewhat in June on a slightly weakened outlook. The underlying data paint a mixed picture of encouraging news and persistent challenges, with continuing doubts about momentum in the economy and frustration with the political climate. Nonetheless, the small business labor market appears to be improving, both in terms of current job openings and those intended for the next three months. Similarly, the latest Job Openings and Labor Turnover Survey (JOLTS) data show the fastest pace of manufacturing job postings in six months, with an increase in net hiring in May. While hiring has picked up from softness earlier in the year, it continues to remain lower than what was observed in the second half of last year.

This week we will get a better sense of whether the recent pickup in manufacturing activity can be sustained as we move into the summer months. Industrial production is expected to reflect a modest gain in June, with expansion also predicted in surveys from the New York and Philadelphia Federal Reserve Banks. With that said, the pace of sales and output growth is anticipated to ease slightly. Other highlights include the latest data on consumer sentiment, housing starts and permits, producer prices, retail sales and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Small Business Confidence Ebbed Somewhat in June after Peaking in May

The National Federation of Independent Business (NFIB) said that small business confidence ebbed somewhat in June after reaching its highest level since September 2007 in May. The Small Business Optimism Index declined from 96.6 in May to 95.0. Despite the decrease, the Optimism Index averaged 95.6 in the second quarter, up from an average of 93.0 in the first quarter. This suggests that small business owner sentiment has mostly improved, even if it waned a bit in June.

Indeed, the underlying data paint a mixed picture of both encouraging news and persistent challenges. On the positive side, the small business labor market appears to be improving. The percentage of job openings that owners have not been able to fill has risen from 24 percent to 26 percent, its highest point in six years. Moreover, the net percentage planning to hire in the next three months increased from 10 percent to 12 percent – a definite improvement from the 5 percent recorded in March.

Nonetheless, the headline figure fell on a weaker outlook. Small business owners expecting the economy to improve six months from now decreased from zero to -10 percent. In addition, the net percentage of respondents anticipating increased sales over the next three months decreased from 15 percent to 11 percent. Capital spending plans also eased slightly, with the percentage expecting to increase their investments over the next three to six months down from 24 percent to 22 percent. Inventory plans also shifted into contraction for the first time since February, down from 1 percent to -1 percent.

The percentage of respondents saying that the next three months would be a “good time to expand” dropped from 10 percent to 7 percent, with continuing doubts about the economy and the political climate.  Taxes (cited by 22 percent) and regulations (20 percent) top the “single most important problem” list, and poor sales (13 percent) and quality of labor (11 percent) rounded out the primary concerns noted by small business owners.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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