NFIB ECONOMIC TRENDS December 2014 SBET_CVR_2012.indd 1-2 3/30/2012 11:27:49 AM NFIB SMALL BUSINESS

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Transcript of NFIB ECONOMIC TRENDS December 2014 SBET_CVR_2012.indd 1-2 3/30/2012 11:27:49 AM NFIB SMALL BUSINESS

  • SMALL BUSINESS OPTIMISM INDEX COMPONENTS

    Index Component Seasonally

    Adjusted Level Change from Last Month

    Contribution to Index Change

    Plans to Increase Employment 15% 4 16% Plans to Make Capital Outlays 29% 4 16% Plans to Increase Inventories 5% 3 12% Expect Economy to Improve 12% - 1 - 4% Expect Real Sales Higher 20% 6 24% Current Inventory - 3% 0 0% Current Job Openings 25% 1 4% Expected Credit Conditions - 5% 1 4% Now a Good Time to Expand 16% 5 20% Earnings Trends - 15% 2 8% Total Change 25 100% (Column 1 is the current reading; column 2 is the change from the prior month; column 3 the percent of the total change accounted for by each component; * is under 1 percent and not a meaningful calculation)

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    Based on a Survey of Small and Independent Business Owners

    NFIB SMALL BUSINESS ECONOMIC TRENDS NFIB SMALL BUSINESS ECONOMIC TRENDS N

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    William C. Dunkelberg Holly Wad

    December 2014

    SBET_CVR_2012.indd 1-2SBET_CVR_2012.indd 1-2 3/30/2012 11:27:49 AM3/30/2012 11:27:49 AM

  • NFIB SMALL BUSINESS ECONOMIC TRENDS _____________________

    NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since 1986. The sample is drawn from the membership files of the National Federation of Independent Business (NFIB). Each was mailed a questionnaire and one reminder. Subscriptions for twelve monthly SBET issues are $250. Historical and unadjusted data are available, along with a copy of the questionnaire, from the NFIB Research Foundation. You may reproduce Small Business Economic Trends items if you cite the publication name and date and note it is a copyright of the NFIB Research Foundation. © NFIB Research Foundation. ISBS #0940791-24-2. Chief Economist William C. Dunkelberg and Senior Policy Analyst Holly Wade are responsible for the report.

    IN THIS ISSUE _____________________ Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Optimism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 10 Credit Conditions . . . . . . . . . . . . . . . . . . . . . . . 12 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Capital Outlays. . . . . . . . . . . . . . . . . . . . . . . . . 16 Most Important Problem . . . . . . . . . . . . . . . . . 18 Survey Profile . . . . . . . . . . . . . . . . . . . . . . . . . 19 Economic Survey. . . . . . . . . . . . . . . . . . . . . . . 20

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    SUMMARY OPTIMISM INDEX The Small Business Optimism Index gained 2.3 points, at long last taking the Index back to its pre-recession average and the highest reading since October 2006. While last month’s gain was accounted for just 2 of the 10 Index components (expected business conditions and real sales), the gain in December was broad-based, with 8 components advancing, one unchanged and one declining by just 1 percentage point. The single component posting a decline was expected business conditions 6 months out. Last month, this component posted a 16 point gain, so the 1 percentage point decline simply confirmed the very strong gain in November. LABOR MARKETS Fifty-four percent reported hiring or trying to hire, but 43 percent reported few or no qualified applicants for the positions they were trying to fill. Fourteen percent reported using temporary workers, down 1 point. Twenty-five percent of all owners reported job openings they could not fill in the current period, up 1 point from November and a very solid reading. This anticipates a further reduction in the unemployment rate even if job creation is not especially strong. Job creation plans improved 4 points to a seasonally adjusted net 15 percent, one of the stronger readings in NFIB survey history. This is a number consistent with the stronger GDP growth reported in the second half of the year and anticipates a ramp in private sector hiring. INVENTORIES AND SALES The pace of inventory reduction shifted to a neutral position, with a net 0 percent of all owners reporting growth in inventories (seasonally adjusted). The net percent of owners viewing current inventory stocks as “too low” was unchanged at a net negative 3 percent. The net percent of owners planning to add to inventory stocks rose 3 points to a net 5 percent, consistent with the improved outlook for sales growth and the positive trend in sales gains. Although satisfaction with current stocks was not strong, if the expected improvements in sales materialize, stocks will be quickly reduced and inventories will need to be built. Expected real sales volumes posted a 6 point gain, rising to a net 20 percent of owners expecting gains, this on top of November’s 5 point gain. Sales prospects are looking up. The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months gained 6 points, rising to a net 2 percent. Eleven percent cited weak sales as their top business problem, one of the lowest readings since December 2007. Consumers really did start to show up, the best thing that can happen to a small business owner. Stronger sales can help cover the rising costs of a burdensome government. This survey was conducted in December 2014. A sample of 3,938 small-business owners/members was drawn. Five hundred sixty eight (568) usable responses were received – a response rate of 14 percent.

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    CAPITAL SPENDING

    Sixty percent reported outlays, up 3 points from November and the strongest reading since December 2007, the peak of the last expansion. Of those making expenditures, 42 percent reported spending on new equipment (up 3 points), 23 percent acquired vehicles (up 1 point), and 16 percent improved or expanded facilities (up 1 point). Six percent acquired new buildings or land for expansion (up 2 points) and 12 percent spent money for new fixtures and furniture (up 2 points). The percent of owners planning capital outlays in the next 3 to 6 months rose 4 points to 29, the best reading for this expansion but still a bit weak historically. A net 20 percent of all owners expect improved real sales volumes, up 6 points on top of November’s 5 point gain. These readings are very supportive of stronger capital spending in 2015.

    INFLATION

    Seasonally adjusted, the net percent of owners raising selling prices was a net 4 percent, unchanged. There are no inflation pressures coming from Main Street. Twenty-nine percent plan on raising average prices in the next few months (up 6 points), perhaps in anticipation of strong sales which will support price hikes. Four percent plan reductions (up 1 point), far fewer than actually reported reductions in past prices. Seasonally adjusted, a net 22 percent plan price hikes (up 3 points). Should these plans be realized, small businesses will become an engine of inflation. EARNINGS AND WAGES

    Earnings trends improved 2 percentage points, reaching a net negative 15 percent (net percent reporting quarter to quarter earnings trending higher or lower). Perhaps the expected sales growth will be supportive of a growth in profits. Three percent reported reduced worker compensation and 24 percent reported raising compensation, yielding a seasonally adjusted net 25 percent reporting higher compensation, up 4 points. A seasonally adjusted net 17 percent plan to raise compensation in the coming months (up 2 points). The reported gains in compensation are still in the range typical of an economy with reasonable growth, and labor market conditions are suggestive of a tightening, which will put