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NFIB Small Business Optimism Index rose 1.6 in July to 105.2
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The Index of Small Business Optimism rose 1.6 points to 105.2, preserving the surge in optimism that started the day after the election. Seven of the 10 Index components posted a gain, two declined, and one was unchanged. Since the recession, the Index peaked at 105.9 in January, just 0.7 points above the July reading. Main Street was buoyed by stronger customer demand despite the dysfunction in Washington, D.C. The economy (GDP) grew about 2 percent in the first half of the year, nothing special, but the second quarter was much stronger than the first, and consumer spending was a major contributor to growth. The stock market continues to post record high readings, although a bit inconsistent with moderate growth in output from the nation’s business sector.
It appears that the Federal Reserve will stay on course, with a likely announcement about shrinking their portfolio in September and another 25 basis point increase in rates in December. Neither of these moves will have a major impact on owners, interest rates are still low, and lenders are more comfortable making loans now that we have left the “0 floor” behind.
Second quarter GDP growth came in at 2.6 percent. However, this is the first estimate from the Bureau of Economic Analysis, two revisions are yet to come. First quarter GDP was revised down to 1.2 percent. Consumers spent more, but residential investment weakened, and capital spending did not add to the growth. Inflation measures were lower in Q2, not good news for the Federal Reserve but they should be pleased that inflation has remained so low.
Although no progress has been made on health care or tax reform, many important changes have occurred to the regulatory structure with few if any new rules showing up in the Congressional Register. These changes will seep into the regulatory structure with little fanfare, but will have significant impacts on regulation costs paid by small businesses going forward.
Apparently economic activity in the second quarter was good enough to divert owner attention from the impotence of Washington lawmakers. There’s nothing like more customers to make owners happy, and optimism held up as did important measures of spending and hiring plans. Congress still holds the key to faster growth, so let’s hope they open the door.
Posted: August 8, 2017 Tuesday 07:00 AM