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NFIB Small Business Optimism Index rose 0.4 points to 96.1
August’s Optimism Index rose 0.4 points to 96.1 making it the second highest reading since October 2007. Expectations are still glum, although improving grudgingly. More owners still think business conditions will be worse in six months than think they will be better. Few see the current period as a good time to expand. The outlook for improvements in real sales volumes faded. Interest in borrowing continues to remain at record low levels; owners are satisfied with inventories and aren’t planning a lot of investment. There is still no evidence that we are about to ramp up spending and hiring to “3 percent” GDP growth levels.
The good news, no recession signal. The bad news, no expansion signal. The NFIB Optimism Index was steady at the high end of its fairly narrow tunnel of moderately poor performances. A persistent up-trend in reported increases in average selling prices snapped, probably in response to unexpectedly weak consumer spending. Capital spending showed a bit more life, along with a hike in plans to continue it. But employment indicators were flat. Job openings increased, anticipating a lower unemployment rate but not more jobs as job creation plans faltered. There just wasn’t a lot of good GDP news in the numbers, just a “more of the same” picture. Spending and hiring seem to be driven mostly by population growth and the need to replace depreciated assets. Weak consumer spending is not helping. Strong exports do not help most small businesses. Manufacturers and some transportation companies benefit but not most others.
The litany of issues that need to be addressed have been laid out by observers for years now, but there is little progress in Washington on any of them. And new ones are being added along the way. Consumer sentiment (Reuters/University of Michigan) is as low in August as it was a year ago and the readings this year are no better than the weak December, 2013 reading. Only 11 percent of consumers think government is doing a “good” job, 48 percent say “poor”. Incomes are rising only for the top 10 percent and they don’t spend enough of that income to compensate for the weak spending of the 90 percent.
Manufacturing is doing well, but there are not many jobs there. However, the small business and consumer segments are not strong and that means economic growth cannot fundamentally be strong. Government spending will not be a major source of stimulus. So, the plodding on continues.
Posted: September 9, 2014 Tuesday 07:30 AM