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NFIB Small Business Sentiment

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    August 10, 2011

    The latest issue of the NFIB Small Business Economic Trends is out today (see report). The August report for July shows a fractional decline in the overall index number.

    Here is the opening summary in the PDF version of the report (download here):

    The Index of Small Business Optimism fell 0.9 points in July to 89.9. This was the 5th monthly decline in a row. None of the declines were large but the trend is still going in the wrong direction. At the two year anniversary of the expansion, the Index is only 3.5 points higher than in July 2009 — still firmly rooted in recession territory. Expectations for real sales growth and business conditions were the major contributors to the decline.

    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 two years later the recession mentality still pervades the small business community.


    Negative Outlook

    Elsewhere in the report we learn that “The net percent of owners expecting better business conditions in six months was a negative 15 percent, down 4 points, and 25 percentage points lower than January. Twenty-three (23) percent report ‘poor sales’ as their top business problem.”

    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.

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    NFIB Small Business Sentiment.

    Image: Flickr