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 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.
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.
Consumer (Lack of) Confidence by Doug Short
Consumer Contraction May be Bottoming by Rick Davis
Consumer Confidence is Terrible but Improving by Steven Hansen