The latest issue of the NFIB Small Business Economic Trends is out today (see report). The September report for August shows a substantial decline in the overall index number, so much so that Chief Economist William Dunkelberg and Policy Analyst Holly Wade grimly refer to it as the Small Business PESSImism Index.
Here is the opening summary in the PDF version of the report (download here):
Confidence in the future of the economy crashed in August, taking the Small Business PESSImism Index down 1.8 points to 88.1. This was the sixth monthly decline in a row. The expansion is officially two years and two months old, but the small business half of the economy is still in the "tank". Expectations for real sales growth and business conditions were the major contributors to the decline for the second month in a row.
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, but over two years later the recession mentality still pervades the small business community.
Negative Outlook
Elsewhere in the report we learn that:
"In particular, it was expected real sales gains and expected business conditions in 6 months that plummeted in the NFIB report. These two components by themselves lowered the Index 2.1 points versus the total loss from all 10 components of 1.8 points. With such a dim outlook, owners are not going to do a lot of hiring or expanding."
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 well below their respective levels at the onset of the Great Recession.
Source: Advisor Perspectives
