NFIB Small Business Survey: Optimistic In March

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by: Doug Short
Summary

In the latest issue of the NFIB Small Business Economic Trends, the headline number for March came in at 101.8, up 0.1 from the previous month.

It was also above the Investing.com forecast of 101.3.

This was an indication that small businesses continue to power the economy after being briefly shaken by January's government shutdown.

Overall, the Index anticipates solid growth, keeping the economy at "full employment" with no signs of a recession in the near term.

By Jill Mislinski

The latest issue of the NFIB Small Business Economic Trends came out on Tuesday morning. The headline number for March came in at 101.8, up 0.1 from the previous month. The index is at the 80th percentile in this series. Today's number came in above the Investing.com forecast of 101.3.

Here is an excerpt from the opening summary of the news release:

The NFIB Small Business Optimism Index increased 0.1 points to 101.8 in March, a historically strong level and an indication that small businesses continue to power the economy after being briefly shaken by January's government shutdown. Overall, the Index anticipates solid growth, keeping the economy at "full employment" with no signs of a recession in the near term. The Uncertainty Index dropped six points to 79, returning to a more normal level for recent years.

"Small business owners continue to create jobs, expand their operations, and are enjoying strong sales," said NFIB President and CEO Juanita Duggan. "Since Congress resolved the shutdown, uncertainty has declined as small business owners add jobs, increase sales, and invest in their businesses and employees."

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 following the Great Recession that ended in June 2009.

NFIB Optimism Index

Here is a closer look at the indicator since the turn of the century.

NFIB Optimism Index Since 2000

The average monthly change in this indicator is 1.3 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.

NFIB Optimism Index Moving Average

Here are some excerpts from the report.

Labor Markets

Job creation was solid in March with a net addition of 0.50 workers per firm (including those making no change in employment), close to February's record of 0.52, and up from 0.33 in January. One percent (down 2 points) reported reducing employment an average of 2.4 workers per firm (seasonally adjusted), the lowest percentage of owners reporting reductions in survey history.

Inflation

How effective has the Fed's monetary policy been in lifting inflation to its two percent target rate?

he net percent of owners raising average selling prices fell 1 point to a net 12 percent, seasonally adjusted. Firms in construction most frequently reported raising their average prices (a net 29 percent). Seasonally adjusted, a net 24 percent plan price hikes (down 2 points).

Credit Markets

Has the Fed's zero interest rate policy and quantitative easing had a positive impact on Small Businesses?

Three percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically very low. Thirty-three percent reported all credit needs met (down 1 point) and 51 percent said they were not interested in a loan, unchanged.

NFIB Commentary

This month's "Commentary" section includes the following observations and opinions:

Economic growth hit a small pothole in the first quarter with a government shutdown and bad weather all around. The most recent economic data indicate that the economy is headed back toward stronger growth - retail sales revised up and housing showing some real energy. Capital spending is turning out to be better than first thought.

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 it is plotted on a separate axis to give a better comparison of the two series from the common baseline of 100.

NFIB Optimism and Consumer Confidence

These two measures of mood have been highly correlated since the early days of the Great Recession. The two diverged after their previous interim peaks, but have recently resumed their correlation. A decline in Small Business Sentiment was a long leading indicator for the last two recessions.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.