The latest issue of the NFIB Small Business Economic Trends is out today (see report). The December update for the November data shows a modest, but most welcome, gain in the overall index number.
Here is the opening summary in the PDF version of the report (download here):
The Optimism Index gained 1.8 points -- it felt like spring! The numbers have been depressing for so long, any little progress looks good. The new reading is still well below the average (prior to 2008) by 8 huge points and below the comparable level in the recovery that started in 2001 by 14 points. But there was more supportive news in the details. Eight of the 10 Index components were unchanged or improved.
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. For example, today's 92.0 remains below the 94.6 reading at the beginning of the last recession.
Weak But Slightly Improved Sales Outlook
Elsewhere in the report we learn that,
"The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past 3 months gained a point, rising to a net negative 11 percent, more firms with sales trending down than up, but an improvement even if at a lousy level. As 25 percent of the owners indicated, 'poor sales' is their top business problem, apparent in the frequency of reported weaker sales trends."
Inflation or Deflation?
The NFIB survey findings certainly don't support the frequent warnings of the hyperinflationists: Seasonally adjusted, the net percent raising selling prices was 0 percent, up 1 point. This indicates little pressure on prices overall."
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 have seen improvement in the last two months, which is a welcome accompaniment to the holiday season.
Source: Advisor Perspectives
