NFIB Small Business Survey: Index Tumbles in September

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The latest issue of the NFIB Small Business Economic Trends came out yesterday morning. The headline number for September came in at 103.0, down 2.3 from the previous month. The index is at the 90th percentile in this series. Today's number came in below the forecast of 105.1.

Here is an excerpt from the opening summary of the news release.

The NFIB Index of Small Business Optimism tumbled in September from 105.3 to 103 led by a steep drop in sales expectations, not just in hurricane-affected states, but across the country.

“The temptation is to blame the decline on the hurricanes in Texas and Florida, but that is not consistent with our data,” said Juanita Duggan, NFIB President and CEO. “Small business owners across the country were measurably less enthusiastic last month.”

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.

NFIB Optimism Index

Here is a closer look at the indicator since the turn of the century. We are now just below the post-recession interim high.

NFIB Optimism Index Since 2000

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.

NFIB Optimism Index Moving Average

Here are some excerpts from the report.

Labor Markets

Job creation weakened in the small business sector as business owners reported an adjusted average employment change per firm of -0.17 workers. Decreases were reported by owners in six of the nine Census regions, so it wasn’t just a hurricane effect.


How effective has the Fed's monetary policy been in lifting inflation to it two percent target rate?

The net percent of owners raising average selling prices declined 3 points to a net 6 percent. Clearly, inflation is not “breaking out” across the country as the Federal Reserve hoped.

Credit Markets

Has the Fed's zero interest rate policy and quantitative easing had a positive impact on Small Businesses?

Two percent of owners reported that all their borrowing needs were not satisfied, down 1 point and historically very low. Thirty-three percent reported all credit needs met (down 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:

Second quarter GDP growth was revised upward to 3.1 percent, the best growth rate in years. Third quarter growth will be hampered by the hurricanes in our 2nd and 4th largest states. Shopping was difficult without a boat and if your boat made it to your workplace, it may have been flooded or without power. Rebuilding will add to growth in the fourth quarter, but replacing assets that were lost is not an optimal use of funds, even if necessary.

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.

NFIB Optimism and Consumer Confidence

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.

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About Jill Mislinski