Tag: NFIB Small Business Optimism Index

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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Monday Economic Report – June 16, 2014

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

Despite a very weak start to 2014, there is an expectation among manufacturers that the second half of the year will be better than the first. Indeed, average manufacturing sales forecasts in the latest NAM/IndustryWeek survey were the highest in two years, with capital investment and hiring plans also moving in the right direction. Indeed, these data points were consistent with 4.0 percent production growth in the sector between now and the fourth quarter of this year, and roughly 86 percent of respondents were either somewhat or very positive in their outlook. These findings mirrored similarly optimistic assessments from business economists, who predict real GDP growth of 3 percent or more in each of the remaining quarters of 2014, with industrial production up 3.7 percent for the year as a whole.

Despite more upbeat perceptions for the coming months, concerns continue to linger. Respondents to the NAM/IndustryWeek survey remain frustrated with political inaction and the slow pace of economic growth. The top business challenges continue to be rising health care costs (72.7 percent) and an unfavorable business climate (71.4 percent). When asked about policy priorities for the next few years, slowing entitlement spending (84.4 percent), finding a long-term budget deal (82.9 percent), reducing regulatory burdens (81.9 percent) and controlling health care costs (78.5 percent) were at the top of the list.

At the same time, consumers remain cautious. The University of Michigan and Thomson Reuters reported that consumer confidence edged lower for the second straight month, although sentiment has not changed much in the first six months of this year. There are persistent worries about labor and income growth, which appear to be preventing Americans from being more optimistic about the future.

These anxieties might also have been a factor in the weaker-than-expected retail spending numbers for May. While retail sales rose for the fourth consecutive month and purchases continue to reflect a rebound from winter-related softness, May’s increase of 0.3 percent was about half of what was predicted. In fact, excluding motor vehicles and gasoline station sales, spending was flat for the month. Nonetheless, one could also paint a more positive picture, with retail sales up 2.2 percent since November and 4.3 percent year-over-year. So perhaps May’s figures were just a pause in an otherwise decent upward trajectory for consumer spending. Small business owners were more upbeat about sales expectations in the latest National Federation of Independent Business (NFIB) survey. The NFIB’s Small Business Optimism Index reached its highest level in May since September 2007, or before the recession began.

Along those lines, the number of nonfarm job postings reached a pre-recessionary high in April. For manufacturers, job openings have increased in the past two months but remain below their recent peak in November. April’s increases in the manufacturing sector were primarily from durable goods firms. Net hiring (or hires minus separations) was also up for the month in manufacturing; however, it also suggests weaker employment growth in early 2014 versus the more robust hiring activity in the second half of 2013. This leaves room for improvement for the coming months.

This week, we will get several economic indicators on manufacturing and housing activity. For example, this morning, the Federal Reserve is expected to show a rebound in industrial production for May after the decline in April, and we will be looking for similar signs in surveys from the New York and Philadelphia Federal Reserve Banks. Tomorrow, we will get new data on housing starts and permits, with the consensus being around 1.04 million annualized units in May, down slightly from 1.07 million in April. On the monetary policy front, we have seen increased pricing pressures of late, even as core inflation for producers declined in May. Yet, the Federal Reserve is not expected to alter its course this week when the Federal Open Market Committee meets. Other highlights this week include new information on consumer prices, leading indicators and state employment.

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

manufacturing job openings - jun2014

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Small Business Confidence Rose to Its Highest Level Since September 2007

The National Federation of Independent Business (NFIB) reported that small business confidence rose its highest level since September 2007. The Small Business Optimism Index increased from 95.2 in April to 96.6 in May, and it has rebounded quite nicely after plummeting in February to 91.4. While the index remains below the threshold of 100 which would signify more-robust growth for smaller firms, it is clear that small business owners have become somewhat more upbeat over the past few months. The results of the NFIB report were similar to latest findings in the NAM/IndustryWeek Survey of Manufacturers, which noted sales, capital spending and hiring intentions at a two-year high.

Indeed, the NFIB small business respondents reported an uptick in sales expectations, up from a net percentage of 10 percent in April anticipating greater sales in the next three months to 15 percent in May. This matched the percentage seen in January, which was the highest level since mid-2007. Hiring plans for the next three months also picked up slightly, increasing from a net percentage of 8 percent to 10 percent. Twenty-four percent of those taking the survey have job openings that they have not been able to fill, unchanged from the prior month. At same time, 24 percent are planning to make a capital expenditure in the next three to six months.

Ten percent of small businesses say that the next three months are a “good time to expand,” up from 8 percent in the last survey. Still, earnings remain somewhat weak, and for those who suggest that it is not a good time for expansion, the top reasons cited include economic conditions and the political environment. The top concerns include taxes (25 percent) and government regulations and red tape (20 percent), both of which receive the most citations on the “single most important problem” list.

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

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Monday Economic Report – May 19, 2014

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

There are numerous signs that global economic growth is lower than expected in 2014, with some disappointing data coming in last week. For instance, industrial production numbers were weaker in a number of countries, including slower industrial growth in China in April relative to just a few months ago and falling output in March in the Eurozone. Europe also learned that real GDP rose at the very slow pace of 0.2 percent in the first quarter, prompting new worries about sluggish income and labor market growth on the continent. Meanwhile, in the United States, the Federal Reserve reported that manufacturing production fell 0.4 percent in April. This followed relatively strong rebounds in February and March from winter-related softness in December and January. Still, output continues to reflect modest gains year-over-year, particularly for durable goods.

Despite April’s decline in industrial production, other data suggest that manufacturing activity in the United States appears to be recovering from earlier weaknesses. Manufacturing surveys from the New York and Philadelphia Federal Reserve Banks both show relatively strong expansions in their regions, even as the Philly Fed report eased a bit in May from April. New orders, shipments and employment reflected continuing expansion from the previous survey. More importantly, manufacturers in each district remained mostly upbeat about the next six months, with more than half of the respondents in both surveys anticipating new orders to increase moving forward. For their part, small business owners were also more optimistic, with the National Federation of Independent Business’s (NFIB) key index rising to its highest level since October 2007.

At first glance, the housing data released last week were also quite positive. Housing starts exceeded 1 million again for the first time this year, up from an annualized 947,000 units in March to 1,072,000 in April. New residential permitting was also higher. Yet, the bulk of April’s increases in both measures were primarily due to the more volatile multifamily housing segment. Single-family starts and permits were only marginally higher, but remain below the recent peaks last November. As such, there is perhaps more softness in the market than the headline figure indicated. (We will get existing and new home sales figures this week.) Indeed, homebuilder confidence fell to its lowest point in 12 months, with consumer anxieties cited as a concern. On the positive side, builders were somewhat more hopeful about future activity.

Consumer data were mixed. Retail sales increased 0.1 percent in April, extending the strong gains from February and March. Auto sales comprised much of April’s gains, with retail spending outside of motor vehicles unchanged from March. As such, consumers appeared to be somewhat cautious in April. This showed up in the latest consumer confidence data as well. The University of Michigan and Thomson Reuters reported that consumer sentiment edged slightly lower in May in its preliminary data, with Americans more concerned about current economic conditions. In terms of prices, consumer inflation has started to pick up slightly, led by higher food costs, but core pricing pressures remain below 2 percent at the annual rate, at least for now. A similar pattern was observed for producer prices.

This week, we will get more news on the health of the manufacturing sector worldwide, with flash Purchasing Managers’ Index (PMI) data from Markit for the United States, Europe, China and Japan. The Kansas City Federal Reserve will also release its latest sentiment survey. Finally, the Federal Open Market Committee (FOMC) minutes from its April 29–30 meeting will be released, providing some insights about current Federal Reserve debates. However, that meeting hardly produced any surprises, with the FOMC continuing to taper its asset purchases and the Federal Reserve’s forward guidance still pointing to short-term rate increases sometime next year.

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

yoy industrial production growth - may2014

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Small Business Confidence Increased to its Highest Level since October 2007

The National Federation of Independent Business (NFIB) said that small business confidence rose to its highest level since October 2007. The Small Business Optimism Index increased for the second straight month, up from 93.4 in March to 95.2 in April. This represents a healthy upturn since February’s weather-deflated optimism level of 91.4. So far this year, the Optimism Index has averaged 93.5, slightly higher than 92.4 average observed in 2013.

With that said, the percentage saying that the next three months would be a “good time to expand” was unchanged at 8 percent, essentially where it has been all year (except for February). The good news was that this was higher than the 6.8 percent average from last year, but it does suggest that small business owners remain anxious about the economy despite recent progress. Taxes (cited by 22 percent) and regulations (20 percent) top the “single most important problem,” with “poor sales” (15 percent) closely following behind.

Regarding sales expectations, the net percentage of respondents saying that they expect sales to be higher in the next three months edged slightly lower from 12 percent to 10 percent. Still, this figure indicates progress on the sales front, averaging 10 percent year-to-date in 2014 versus the more-cautious 3.8 percent rate observed in 2013. Similarly, the net percentage of respondents planning to hire new workers rose from 5 percent to 8 percent, with the year-to-date average of 8 percent exceeding the 6.25 average from last year. Meanwhile, capital spending moved slightly higher, with 25 percent planning increased investments in the next 3 to 6 months, up from 24 percent the month before.

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

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Monday Economic Report – April 14, 2014

Here is a summary of this week’s Monday Economic Report:

In the minutes of its March Federal Open Market Committee (FOMC) meeting, the Federal Reserve Board highlighted the negative impact of weather events on first-quarter growth. Winter storms hampered business investment, construction, consumer spending and manufacturing production. Nonetheless, the Federal Reserve still anticipates real GDP growth of between 2.8 and 3.0 percent in 2014, faster than last year’s 1.9 percent expansion. While this reflects a slight downgrade in the outlook for the year from the last forecast, it continues to suggest that the economy will regain its momentum moving forward. The Federal Reserve also predicts growth of 3.0 to 3.2 percent in 2015. The International Monetary Fund’s World Economic Outlook, which was released last week, mirrors these figures in its own forecasts for the United States.

The highlight of the FOMC minutes was the background discussion among participants regarding future monetary policy actions. The Federal Reserve largely feels that the U.S. labor market has a lot of “slack” in it, which is not reflected by the 6.7 percent unemployment rate. Despite improvements in the unemployment rate, weaknesses continue, with the participation rate near 30-year lows and high rates of both underemployment and part-time employment. While some FOMC members feel there has been sufficient economic progress to warrant less stimulative monetary policy measures, the majority view the current labor market as sufficiently weak enough to continue the Federal Reserve’s highly accommodative actions for the foreseeable future. The Federal Reserve will continue to reduce its long-term asset purchases, but short-term interest rates will likely not rise until next year at the earliest. Inflationary pressures remain modest, providing the Federal Reserve with some wiggle room to do its stimulative measures.

The most recent Job Openings and Labor Turnover Survey (JOLTS) data suggest the labor market for manufacturers remains soft. The number of manufacturing job openings declined for the third month in a row in February. Postings have been lower since peaking in November, and the December to February time frame mirrored the weather-related weaknesses seen in other data. Net hiring was also lower in those three months, with 2,000 more separations than hires in February. Still, the manufacturing sector has added an average of 12,125 workers each month since August, mirroring the uptick in demand and production that we have seen since that point. We are hopeful that hiring begins to accelerate again in the coming months.

Looking at the sentiment surveys last week, businesses and consumers were more upbeat. The California Manufacturing Survey from Chapman University reported rising expectations for new orders and production for the second quarter, but with employment growth remaining soft. Both durable and nondurable goods activity were anticipated to expand modestly in the current quarter. Likewise, small business owners in the National Federation of Independent Business’ (NFIB) survey were more optimistic about future sales, and those saying the next three months were a good time to expand edged marginally higher. Still, earnings remained weak, and the percentage suggesting they would bring on more workers moved lower. The University of Michigan and Thomson Reuters also noted improved consumer sentiment, a welcome gain after three months of dampened enthusiasm.

This week will be a busy one on the economic front, specifically with new reports on housing starts and industrial production. We hope to move beyond the weather-related weaknesses from earlier this year, and March’s manufacturing output numbers are expected to show a continued rebound. Similarly, housing starts moved slightly higher in February, but permits surpassed the 1 million mark for the first time since November; yet, rising interest rates, financial challenges for potential buyers and low inventory remain concerns. Other highlights this week include new data on consumer prices, leading indicators, manufacturing surveys from the New York and Philadelphia Federal Reserve Banks and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers. Note that General Electric Chief Economist Marco Annunziata will prepare the Monday Economic Report for April 21.

participation rate - apr2014

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