The latest issue of the NFIB Small Business Economic Trends is out today (see report). The April update for March at 92.5 is 1.8 points below the February number. This is the biggest month-over-month decline since the 2.6 point drop exactly 12 months ago, when the index fell from its interim high of 94.5 to 91.9.
Here is the opening summary of the report:
After six months of gains, the Small-Business Optimism Index fell by almost 2 points in March, settling at 92.5. After a promising start to the year, nine of ten index components dropped last month, most notably hiring plans and expected real sales growth each taking a significant dive, in spite of owners reporting the largest increase in new jobs per firm in a year.
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 Lion Becomes a Lamb
Elsewhere in the report we learn that, "March came in like a lion, with Main Street seeing significant job growth in March—but it appears to have gone out like a lamb, and with no cheer in the forward-looking labor market indicators. What could have been a trend in job growth is more likely a blip," said NFIB Chief Economist Bill Dunkelberg. "And what looked like the start of a recovery in profits fizzled out. The mood of owners is subdued—they just can't seem to shake off the uncertainties out there, and confidence that the management team in Washington can deal with the effectively is flagging. What we saw in March is painfully familiar – this was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself—and not in a good way."
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.
As the chart illustrates, both indexes are currently below their respective levels at the onset of the Great Recession. But we had seen some steady improvement in recent months. Let's the March slump is an outlier and not, as NFIB Chief Economist Bill Dunkelberg fears, history repeating itself.
Source: Advisor Perspectives
