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The headline index ticked down .1 to 90.6. This is the 23rd consecutive month of sentiment below the 50-year average of 98.

The index surveys members of the National Federation of Independent Businesses and reports net numbers. When asked if the economy will improve, a net 42% of members surveyed said No. If no one answered “I don’t know,” 71% of those surveyed said, No, the economy will not improve and 29% think, Yes, the economy will improve. This is the most pessimistic component in the index.

Interestingly the “soft” numbers in the index are coming through as very pessimistic. These include “expectations and outlooks.” But the “hard” numbers are not historically poor. These include “plans” to hire, build inventory, and make capital expenditures as well as current earnings and job openings. Anecdotally, given the disparity in the 2 “sub-indices,” I think that the boom during covid and coming out of covid is having an affect on sentiment.

The gist of the report is that current sales are going down (-17%). Future sales expectations are looking better but still negative (-8%). At the same time, compensation to employees is going up with a net +36% saying they had to raise compensation and +30% saying they will raise compensation in the next 3 months. Therefore -32% think there are better prospects for earnings. Sales volume and increased costs were equally cited as the number 1 reason for lower earnings expectations.

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