The latest issue of the NFIB Small Business Economic Trends is out today (see report). The March update for February came in at 90.8, which puts it at the 11th percentile in this series.
Here is the opening summary of the report:
The NFIB Small Business Optimism Index increased 1.9 points in February to 90.8. While a nice improvement over the last several reports, the Index remains on par with the 2008 average and below the trough of the 1991-92 and 2001-02 recessions. The direction of February's change is positive, but not indicative of a surge in confidence among small-business owners. Of the ten Index components, one fell, one remained unchanged and eight improved. Most notably, the gains in capital spending and inventory investment plans were large, but by historical standards the levels remain very low.
"While the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed. Far more firms report sales down quarter over quarter than up. Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the sequester. Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship. Three-quarters of small-business owners think that business conditions will be the same or worse in six months. The Index gained almost 2 points last month; that was good news. But, until owners' forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy." -- NFIB chief economist Bill Dunkelberg
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 three 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 sales and sales expectations continue to highlight a fundamental source of distress.
Has the Fed's strategy of quantitative easing had a positive impact on Small Businesses?
This month's "Commentary" section includes some observations on our "bifurcated" economy:
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.
With the latest NFIB data, we continue to see that the mood of small businesses is highly correlated with Consumer Confidence.