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

Some of the indicators released last week helped confirm the belief that the U.S. economy has started 2013 on a stronger-than-expected note. First, industrial production rose 0.8 percent in February, led by strong demand for automobiles and other goods. This was a decent turnaround from much weaker numbers in January, with all but three major manufacturing sectors experiencing higher production. Second, retail sales rose a surprisingly healthy 1.1 percent in February. While much of that growth stemmed from higher gasoline prices and higher motor vehicle sales, the data suggested modest growth overall, with Americans continuing to make modest gains in purchases despite headwinds from higher taxes and fiscal uncertainties.

At the same time, those headwinds appear to be having some negative impacts. Industrial production was increasing at a 5.1 percent year-over-year pace at this point last year; today, that rate is 2 percent. That example can be replicated in so many of the recent indicators. For instance, the NAM/IndustryWeek Survey of Manufacturers reported an uptick in optimism in the latest survey, with sales expected to grow 2.3 percent over the next year. That represents an improvement from three months ago (when the rate was 1.0 percent), and the percentage of respondents who were positive about their own company’s outlook rose from about 52 percent in December to roughly 70 percent today. But this is a come-down from the stronger pace of nearly 5 percent growth in annual sales expected in March of last year (when approximately 89 percent were positive in their outlook). Clearly, more work still needs to be done to get the economy moving. (continue reading…)

The National Federation of Independent Business said that small business owner confidence edged slightly higher to begin the new year. The Small Business Optimism Index rose from 88.0 in December to 88.9 in January. Nonetheless, it is hard to paint these figures in a positive light, particularly with low readings for three straight months. In October, the index stood at 93.1 before plunging to 87.5 in December. Recent gains still suggest sub-par levels of optimism, with owners remaining anxious about the economic and political environment.

There was a net percentage of 6 percent of respondents suggesting that the next three months were a good time to expand. Of those saying tht it was not a good time, economic and policy concerns were most pressing. Indeed, the most important problems — each garnering 21 percent of responses — were taxes and government regulations. The tax challenge that confronts many small business owners would be the higher tax rates faced by many of them resulting from the fiscal cliff deal. Poor sales were cited by 19 percent.

Many of the key indicators remain weak, even as some of them had marginal improvements for the month. For instance, the net percentage of those experiencing sales gains in January was -9 percent, a slight bit of progress from the -15 percent and -10 percent levels seen in the prior two months. Similarly, the percentage of respendents expecting the economy to improve stayed extremely low (-30 percent), and measures for earnings, prices, hiring, and capital spending continue to be sluggish.

Overall, the NFIB data indicate that small business owners remain pessimistic in January. Given the important role that small firms play in our nation’s economy, that is a troubling sign. Historically, Optimism Index readings of 100 or more were consistent with a healthy and growing small business sector, and we remain well below those levels.

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

The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index dropped sharply from 93.1 in October to 87.5 in November. This is the lowest level since March 2010, erasing the steady gains that we have seen in the past 2½ years.

NFIB also said that it was “one of the largest declines in survey history.” While some of the effects of Hurricane Sandy were “apparent,” according to NFIB, the major contributing factor was the outcome of the election and worries about the probable fiscal cliff. Of those suggesting that now was not a “good time to expand,” the top reasons cited were the economy and the political climate.

Respondents were asked about their outlook for general business conditions six months from now. The net percentage of small business owners with a positive outlook plummeted from +2 in October to -35 in November. The shift of 37 percentage points in the outlook was both dramatic and troubling. (To put it in perspective, the low point during the Great Recession was -23 in March 2008.) Clearly, smaller firms are frustrated, with uncertainties about the future direction of the economy paramount in their minds. These findings can be seen in diminished expectations for sales, earnings, inventories, and capital spending.

Perhaps surprisingly given these results, the employment variables appear to be less impacted by the more-negative feelings. Small business employment growth remains quite anemic, with net hiring in November turning negative (down from +1 to -1 for the month). But, the net percentage of firms with job openings and with hiring plans for the next three months actually edged higher in November (each by one percentage point). While this still indicates sluggish hiring plans moving forward, employment is notable in that it did not fall like many of the other indicators. (continue reading…)

The National Federation of Independent Business reported that its Small Business Optimism Index was virtually unchanged in September. The index edged slightly lower from 92.9 in August to 92.8 in September. While this is an improvement from June and July, when the index was 91.4 and 91.2, it is lower than the sentiment observed in April and May when the index was 94.5 and 94.4.

One year ago, the index stood at 88.9, suggesting some improvement over the past 12 months. Still, historically, a strongly expanding small business sector corresponds to index values of 100 or greater, indicating that there is significant room for more growth.

The main driver of lower values in the index over the past four months has been slower sales and reduced earnings. The net percentage of sales turned negative in June and has worsened since then, currently standing at -13 percent. Sales are also the most important reason for lower profits. Another concerning data point is the net percentage of small business owners planning to hire in the next three months, which fell from 10 percent to 4 percent for the month. This suggests that hiring intentions have eased in September.

With all of that said, the net percentage of respondents saying that the next three months would be a “good time to expand” rose from 4 percent to 7 percent. This is a modest gain, albeit one that suggests weak growth ahead. It is clear that small business owners are anxious about the economy, the election and the fiscal cliff. Of those saying that the next three months were not a good time to expand, the top reasons cited were economic conditions and the political climate.

The single most important problem according to small business owners was a three-way tie between taxes, poor sales, and government regulations and red tape. Each of these answers received 21 percent of the responses. This question’s top concern has hovered between taxes and poor sales over the past few months.

Chad Moutray is chief economist, National Association of Manufacturers.

The National Federation of Independent Business said that small business owners were slightly more optimistic in August. The Small Business Optimism Index rose from 91.2 in July to 92.9 in August. Even with the higher figure, the overall results were mixed.

The net percentage of respondents saying that the next three months are a “good time to expand” continues to fall, down from 10 percent in December to 5 percent in July to 4 percent in August. Economic and political concerns were the primary reason for this response. Sales and earnings data were also weak.

On the other hand, small businesses were more upbeat on their employment plans. The net percentage of owners saying that they plan to hire in the next three months rose from 5 percent to 10 percent for the month. It was zero as recently as March. This suggests that small firms plan to hire more workers in the coming months – a good sign. Capital expenditure plans were also higher.

The top concern for small business owners was taxes. This is almost certainly the result of rising anxieties regarding the fiscal cliff, with marginal tax rates expected to go up on January 1^st unless the President and Congress act before then. It was cited by 23 percent of those taking the survey. This was followed by concerns related to government regulations (21 percent) and poor sales (20 percent). Poor sales had been the top concern in July.

Chad Moutray is chief economist, National Association of Manufacturers.

The National Federation of Independent Business said that small business owners were more pessimistic in June, falling to their lowest level since October. The Small Business Optimism Index fell from 94.4 in May to 91.4 in June.

The net percentage of respondents saying that the next three months are a “good time to expand” has declined from 10 in December to 5 in June. For the most part, small business owners remain anxious about the economic and political environment, as indicated by the reasons cited for their response on the expansion question. These findings are similar to what we saw in the NAM/IndustryWeek Survey.

Lower earnings were among the primary reasons for the lower readings in June. After seeing some improvements on the earnings in April, the net percentage of respondents saying that their earnings have risen has fallen since then.

Sales volumes have turned from a net positive to a net negative this month, with similar expectations for the next three months. “Poor sales” returned as the top concern for small business owners after a two-month reprieve, cited by 23 percent of respondents. This was followed by taxes (21 percent) and government regulations and red tape (19 percent).

Meanwhile, employment and capital spending expectations for the next three months remain positive but have eased somewhat. In short, these results show that entrepreneurs have become more concerned about the current and future economic environment, mirroring weaknesses seen in other economic indicators.

Chad Moutray is chief economist, National Association of Manufacturers.