NFIB Small Business Survey: Stable In February
The latest issue of the NFIB Small Business Economic Trends came out this morning. The headline number for February came in at 101.7, up 0.5 from the previous month. The index is at the 79th percentile in this series. Today's number came in below the Investing.com forecast of 102.0.
Here is an excerpt from the opening summary of the news release.
The NFIB Small Business Optimism Index improved modestly in February, increasing 0.5 points to 101.7. Views about future business conditions and the current period as a good time to expand improved as did plans to make capital outlays. Earnings trends weakened, as a million laid off workers and others affected by the shutdown cut back on spending. The loss of sales falls right to the bottom line. Worker compensation and selling prices were lower in February than they were in January, but job openings rebounded remaining at historically high levels. The Uncertainty Index fell 1 point to 85, a small decline but still showing a lot of residual uncertainty from the government shutdown.
“Small business owners are thankful to have the government shutdown in the rear view mirror but need more certainty about the future,” said NFIB President and CEO Juanita D. Duggan. “Small businesses put their money where their expectations are as we’ve seen when they get tax and regulatory relief. The best thing Washington can do for the small business half of the economy is to continue the policies – tax cuts and deregulation – that leave them with more resources to invest and find qualified workers.”
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.
Here is a closer look at the indicator since the turn of the century.
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.
Here are some excerpts from the report.
Labor Markets
Job creation broke the 45-year record in February with a net addition of 0.52 workers per firm (including those making no change in employment), up from 0.25 in December, and 0.33 in January. The previous record was 0.51 reached in May 1998.
Inflation
How effective has the Fed's monetary policy been in lifting inflation to its two percent target rate?
The net percent of owners raising average selling prices fell 2 points to a net 13 percent, seasonally adjusted. Firms in the wholesale trades most frequently reported raising their average prices (net 47 percent). Price hikes were much less frequent in other industry groups.
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-four percent reported all credit needs met (up 1 point) and 51 percent said they were not interested in a loan, up 2 points.
NFIB Commentary
This month's "Commentary" section includes the following observations and opinions:
By December, nearly a million government workers knew they would very likely be laid off and not paid. Even though there was an expectation that they would receive back pay, the uncertainty was “when?”. In the meantime, with NO cash coming in, these consumers pulled back from the holiday exuberance and cut spending.
But, there are still uncertainties, such as those created by current changes in trade policies. Asked if recent trade policies had impacted their businesses, 28 percent replied “somewhat negatively” and 9 percent reported a “significant negative effect.” Only 5 percent reported a positive effect.
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.
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.