The latest issue of the NFIB Small Business Economic Trends is out today. The update for April came in at 96.9, a 1.7 point increase from the previous month. The index is now at the 33rd percentile in this series.
The Investing.com forecast was for 95.8.
Here is the opening summary of the news release.
|The Small Business Optimism Index increased 1.7 points from March to 96.9, this in spite of a quarter of virtually no economic growth. Unfortunately, the Index remained below the January reading. Nine of the 10 Index components gained or were unchanged, only real sales expectations were weaker. But this still leaves the Index below its historical average, oscillating between 95 and 98 but never breaking out except for December, when the Index just tipped past 100, only to fall again.
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.
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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.
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Here are some excerpts from the report.
|Small businesses posted another decent month of job creation. Those that hired were more aggressive than those reducing employment, producing an average increase of 0.14 workers per firm, continuing a string of solid readings for 2015. Fifty-three percent reported hiring or trying to hire (up 3 points), but 44 percent reported few or no qualified applicants for the positions they were trying to fill. Thirteen percent reported using temporary workers, up 3 points. Twenty-seven percent of all owners reported job openings they could not fill in the current period, up 3 points from March. A net 11 percent plan to create new jobs, up 1 point and a solid reading.
Has the Fed’s zero interest rate policy and quantitative easing had a positive impact on Small Businesses?
|Four percent of owners reported that all their borrowing needs were not satisfied, down 1 point and historically low. Thirty-one percent reported all credit needs met, and 53 percent explicitly said they did not want a loan. For most of the recession, record numbers of firms have been on the “credit sidelines”, seeing no good reason to borrow. Only 2 percent reported that financing was their top business problem (down 1 point) compared to 22 percent citing taxes, 23 percent citing regulations and red tape and 11 percent citing weak sales.
This month’s “Commentary” section includes the following observations:
|So 2015 got off to a slow start with GDP increasing only 0.2 percent at first “guess”. Trade data will apparently depress that further, perhaps producing a negative print, although more consumer spending may be found to keep growth above the 0 line. For a different perspective, GDP has grown 3 percent from the end of Q1 2014 to the end of Q1 2015, reflecting the volatility in growth that has occurred. Growth for the year will improve, but this was not a good start.
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 volatility from the common baseline of 100.
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These two measures of mood have been highly correlated since the early days of the Great Recession.
Images: Flickr (licence attribution)
About The Author
My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool