Allow me to blow off a little steam before I start analyzing the National Federation of Independent Business (NFIB) survey release for October 2010. This survey is a poll of NFIB members on their feelings on various subjects. This is a survey where there will never be much hard data to confirm its accuracy.
I generally have negative feelings towards all surveys as their results too often are contradicted by hard data. One reason is that generally the survey was completed by some administrative assistant – instead of a knowledgeable person.
Not many small businesses have administrative assistants. Sentiment from this employment engine sector of the economy IS important. And on issues such as hiring, their sentiment has been reflected in poor jobs growth data.
This morning, on major news networks and CNBC, the American people were told that sentiment of small business improved. Little context was offered. It appears few people are interested in more than headlines. So here is the headline:
The Index of Small Business Optimism gained 0.2 points in September, rising to 89.0.
The rest of the headline was generally not reported.
The increase is certainly not a significant move, but at least it did not fall. Still, the Index remains in recession territory. The downturn may be officially over, but small business owners have for the most part seen no evidence of it.
The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months lost one point, falling to a net negative 17 percent. The reading is 17 points better than June 2009 (the recession bottom) but still indicative of very weak customer activity. Unadjusted, 23 percent of all owners reported higher sales (last three months compared to prior three months, down two points) while 34 percent reported lower sales (up one point). Overall, it does not appear that sales trends are yet supportive of a recovery in the small business sector. The net percent of owners expecting higher real sales lost three points from August, falling to a net negative three percent of all owners (seasonally adjusted) – a dismal outlook. Hiring and capital spending depend on expectations for growth in future sales, so the outlook for improved spending and hiring is not good.
Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stock. A net negative 14 percent of all owners reported gains in inventories, one point better than August but still very weak. September is the 30th negative double digit month in a row and the 40th negative month in a row for inventory reductions.
I feel better now. I hope you have the time to read the entire report of the NFIB. Remember the NFIB is an industry group, and you need to read between the lines to a truly unbiased commentary.
But the bottom line is that there is no improvement in the sentiment of small business (on things that matter it is worse), and this survey reflects the zero / small growth outlook of Econintersect.