NFIB ECONOMIC TRENDS - Small Business Association Based on a Survey of Small and Independent...

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Transcript of NFIB ECONOMIC TRENDS - Small Business Association Based on a Survey of Small and Independent...

  • SMALL BUSINESS OPTIMISM INDEX COMPONENTS

    Index Component Seasonally

    Adjusted Level Change from Last Month

    Contribution to Index Change

    Plans to Increase Employment 0% - 4 * Plans to Make Capital Outlays 22% -1 * Plans to Increase Inventories 0% - 2 * Expect Economy to Improve -8% - 2 * Expect Real Sales Higher 8% - 4 * Current Inventory 3% 1 * Current Job Openings 15% - 2 * Expected Credit Conditions -11% - 1 * Now a Good Time to Expand 7% - 1 * Earnings Trends -23% - 4 * Total Change - 20 * (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)

    1201 “F” Street N W

    Suite 200 W

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    20004 nfib.com

    Based on a Survey of Small and Independent Business Owners

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    William C. Dunkelberg Holly Wad

    April 2012

    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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 4 Capital Outlays. . . . . . . . . . . . . . . . . . . . . . . . . 16 Most Important Problem . . . . . . . . . . . . . . . . . 18 Survey Profile . . . . . . . . . . . . . . . . . . . . . . . . . 19 Economic Survey. . . . . . . . . . . . . . . . . . . . . . . 20

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    SUMMARY OPTIMISM INDEX Six monthly gains in the Index of Small Business Optimism were reversed in March, as the index fell almost 2 points to 92.5. Nine of the ten Index components declined, only increasing satisfaction with inventory stocks added one point to the Index computation. It looks like a replay of 2011, a few months look good early on and then it all fades.

    LABOR MARKETS The percent of owners reporting hard to fill job openings fell 2 points to 15 percent, the second monthly decline since reaching 18 percent in January, the highest reading since June 2008. Hard-to-fill job openings are a strong predictor of the unemployment rate and indicate that the rate is likely to rise, other things equal. This is reinforced by a four month decline in the net percent of owners planning to create new jobs. March’s net 0 reading was 4 points lower than February and 7 points lower than last November. With a net 0 percent planning to create new jobs, it is hard to be optimistic about job growth.

    CAPITAL SPENDING The frequency of reported capital outlays over the past six months fell 5 points to 52 percent, a reversal of the gains posted in January and February. The record low of 44 percent was reached most recently in August 2010. Twenty-two (22) percent report “poor sales” as their top business problem, unchanged from February. With an outlook like this, fewer owners will bet their hard earned capital on the future. It is too uncertain. The percent of owners planning capital outlays in the next three to six months fell one point to 22 percent. Seven percent characterized the current period as a good time to expand facilities (seasonally adjusted), down 1 point. The net percent of owners expecting better business conditions in six months was a negative 8 percent (down 2 points).

    INVENTORIES AND SALES The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past three months gained a surprising 8 points, rising to a net 1 percent. This is the best reading since December 2007, the peak of the last expansion. The net percent of owners expecting higher real sales lost 4 points, falling to a net 8 percent of all owners (seasonally adjusted). A net negative 9 percent of all owners reported growth in inventories (seasonally adjusted), 9 points worse than February. For all firms, a net 3 percent (up 1 point) reported stocks too low, one of the most positive reports in 37 years. Overall, it appears that small business owners have reduced inventories to acceptable levels given the outlook for sales growth. Without improved sales, there is little motivation to order new inventory. Plans to add to inventories fell 2 points to a net 0 percent of all firms (seasonally adjusted).

    This survey was conducted in March 2012. A sample of 3,938 small-business owners/members was drawn. Eight hundred nineteen (757) usable responses were received – a response rate of 19 percent.

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    INFLATION

    Twenty-five percent of the NFIB owners reported raising their average selling prices in the past three months (up 5 points) and 17 percent reported price reductions (up 1 point). Seasonally adjusted, the net percent raising selling prices was 6 percent, up 5 points from February. The Federal Reserve is counting on low inflation to bolster its position that current policy is appropriate for the next year or two. Overall, price hikes were quite pervasive as owners respond to rising input costs (labor and materials) and try to pass those costs on to customers. Twenty-six (26) percent plan on raising average prices in the next few months, 4 percent plan reductions. Seasonally adjusted, a net 21 percent plan price hikes, up 2 points. Price cutting appears to be fading and this will put upward pressure on the inflation measures. EARNINGS AND WAGES

    Reports of positive earnings trends lost 4 points in March, falling to a net negative 23 percent. Not seasonally adjusted, 14 percent reported profits higher (down 2 points), and 43 percent reported profits falling (up 4 points). Profits are the source of capital to grow small firms since they can’t sell shares to shareholders to provide new capital, so this decline in profit trends is not a welcome development. Six percent reported reduced worker compensation and 20 percent reported raising compensation, yielding a seasonally adjusted net 14 percent reporting higher worker compensation, the highest reading in 39 months. A net seasonally adjusted 9 percent plan to raise compensation in the coming months, a 3 point decline from February. CREDIT MARKETS Financing remained low on the list of concerns for business owners. Only 3 percent cited financing as their top business problem, compared to 20 percent citing taxes, 19 percent unreasonable regulation and red tape and 22 percent citing weak sales. Ninety-two (92) percent reported that all their credit needs were met or that they were not interested in borrowing. Twenty-seven (27) percent reported all credit needs met, eight percent reported that not all of their credit needs were satisfied and 52 percent said they did not want a loan. Thirty-one (31) percent of all owners reported borrowing on a reg