The latest issue of the NFIB Small Business Economic Trends was out yesterday (available here). The November update for October came in at 91.6, down 2.3 points from the previous month's 93.9. Today's overall number is at the 13.1 percentile in this series -- down in the lowest quintile in its history. Since its initial recovery following its Great Recession trough, this index has been stuck in an extremely volatile range for the past three years. Since January of 2011, it has repeatedly bumped a ceiling around the 94 level and then retreated.
Here is an excerpt from the opening summary of the report:
Fall arrived literally this month, as small business optimism dropped from 93.9 to 91.6, largely due to a precipitous decline in hiring plans and expectations for future smal -business conditions. Of the ten Index components, seven turned negative, falling a total of 27 percentage points. The stalemate in early October over funding the government as well as the failed "launch" of the Obamacare website left 68% of owners feeling that the current period is a bad time to expand; 37% of those owners identified the political climate in Washington as the culprit—a record high level.
The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings of the past four years. The NBER declared June 2009 as the official end of the last recession.
The average monthly change in this indicator is 1.29 points. To smooth out the noise of volatility, here is a 3-month moving average of the Optimism Index along with the monthly values, shown as dots.
Inventories And Sales
The findings on small business inventories and sales continue to underscore the general pessimism of the survey. The excerpts below are from the latest monthly report (PDF format).
Has the Fed's zero interest rate policy and quantitative easing had a positive impact on Small Businesses?
This month's "Commentary" section concludes with the following observations:
Business Optimism and Consumer Confidence
The next chart is an overlay of the Business Optimism Index and the Conference Board Consumer Confidence Index. The consumer measure is the more volatile of the two, so I've plotted it on a separate axis to give a better comparison of the volatility from the common baseline of 100.
These two measures of mood have been highly correlated since the early days of the Great Recession, although we see a bit of contrast in the latest readings of the two. Consumer Confidence has generally been trending higher since its post-recession trough in 2011, but Small Business keeps bumping a ceiling just above its current level.