The latest issue of the NFIB Small Business Economic Trends is out today. The December update for November came in at 98.1, up 2.0 points from the previous month. Today's report subtitle underscores the theme of the report: "Index components collectively gained a net 22 percentage points on strength of business expectations and higher sales". The index is now at the 37.1 percentile in this series and at a new post-recession high, its highest level since February 2007.
The Investing.com forecast was for 96.6.
Here is the opening summary of the news release.
The Small Business Optimism Index gained 2.0 points, taking the Index to its highest level since February 2007. The average of the Index from 1974Q4 to 2014 to date is 98, which includes all the Great Recession readings. What didn’t improve were the four “hard” Index components: job creation plans, plans for capital outlays, job openings and inventory investment plans, together adding a negative 1 percentage point to the Index. The entire gain in the Index was accounted for by two components: Expectations for Business Conditions in Six Months and Expectations for Real Sales Volumes, adding a combined 21 percentage points to net favorable responses, perhaps a response to the November election results. (Link to press report (PDF)).
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 four years. The NBER declared June 2009 as the official end of the last recession.
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.
Here are some excerpts from the report.
Labor Markets
The percent of owners reporting job creation fell a point from October to a net 2 percent of owners, continuing a four month run in positive territory. Overall, the average increase in workers per firm was 0.05 workers per firm, up from 0 in October, positive even if small. Twelve percent report increasing employment an average of 3.6 workers while 10 percent reduced their workforce by an average of 3.3 workers (seasonally adjusted).
Credit Markets
Has the Fed's zero interest rate policy and quantitative easing had a positive impact on Small Businesses?
Four percent of the owners reported that all their credit needs were not met, holding at the historic low. Twenty-nine percent reported all credit needs met, and 54 percent explicitly said they did not want a loan. Only 3 percent reported that financing was their top business problem. Thirty-three percent of all owners reported borrowing on a regular basis, up 5 points and high compared to recent experience. The average rate paid on short maturity loans increased 10 basis points to 5.6 percent. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative 6 percent; 1 point worse than October.
NFIB Commentary
This month's "Commentary" section opens with some observations about the mid-term election:
Last month, we asked if the election outcome would matter to small business owners, planning to look for evidence in the November survey results which are mailed in over the entire month. It clearly had no impact on hiring and spending plans, these were unchanged from October numbers. But expectations did improve, with a 16 percentage point gain in expectations for better business conditions in 6 months and a 5 point gain in expectations for higher real sales in the coming months, likely not a response to “Black Friday” or “Small Business Saturday” results.
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.
These two measures of mood have been highly correlated since the early days of the Great Recession.
