Small Business Sentiment Remains in a Stealth Recession

The latest issue of the NFIB Small Business Economic Trends is out today. The heavily watched Small Business Optimism Index declined slightly from 93.2 to 92.6. Here’s the opening paragraph of the report:

The Index of Small Business Optimism lost 0.6 points in December, dropping to 92.6, not a huge change but not the hope-for rebound that would signify more growth in the small business sector. Apparently, the “management change” in Washington and marginally better retail sales numbers were not enough to pump up spirits at the New Year celebrations. This marks the 36th month of recessionary levels. Only once in that period did the Index get above 93 (last month) and has been below 90 for 26 months.

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 the recession mentality still pervades the small business community.

Click to View
Click for a larger image

Elsewhere in the report we learn that December was the 26th consecutive month in which more business owners were cutting prices than raising them, although the velocity of price cuts is easing. Ultimately, the top problem remains weak sales, spread over too many firms, which thus undermines hiring employees or spending on capital projects.

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, the Small Business Sentiment Index has mirrored the decline in Conference Board consumer confidence report that was released on December 28.

Related Articles

Consumer (Lack of) Confidence  by Doug Short

Consumer Contraction May be Bottoming  by Rick Davis

Consumer Confidence is Terrible but Improving  by Steven Hansen 

Share this Econintersect Article:
  • Print
  • Digg
  • Facebook
  • Yahoo! Buzz
  • Twitter
  • Google Bookmarks
  • LinkedIn
  • Wikio
  • email
  • RSS
This entry was posted in Consumer Sentiment and tagged , , , , , , . Bookmark the permalink.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.