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NFIB Small Business Optimism Index gained 0.4 points to 94.3
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The Small-Business Optimism Index gained 0.4 points in February to 94.3 marking the 6th consecutive month of gains. While still historically low, the latest increase is a sign that the recovery is likely to continue. The Index is lower than that of February 2011 but the 2nd highest reading since December 2007, the beginning of the recession. The report suggests that in February, owners became slightly more pessimistic about the outlook for business conditions but more optimistic about future sales growth, making the reading mixed bag, but mostly headed in the right direction.
The Index posted its 6th monthly gain, but it is still 0.2 points below its level in February 2011. No progress here, even with a six month positive trend. The good news is that things are getting better, although improving at a glacial pace. The jobs numbers are looking better, but with such unusual weather, one is never sure just what the seasonal adjustments are doing to the measures. The NFIB statistics for its 350,000 members do indicate that jobs are finally being created, but again, at a slow pace. Adding millions to our population over the past few years certainly helps lift the need for workers, as well as for provide them.
NFIB inflation numbers are benign retrospectively, with a net 1 percent of owners raising prices. But, 1 in 5 plan to raise prices over the coming months and if those stick, the numbers will get worse for those hoping for low inflation. The price of gasoline is a wild card going forward now that the Federal Reserve has set its inflation target based on the headline PCE (personal consumption expenditures) inflation rate and not the core which excludes food and energy. Of course the Federal Reserve can argue that any surge in inflation driven by gas prices will be temporary, the argument used to justify using core inflation measures, and thus not relevant to policy determination.
It appears that the adjustment of inventories to lower consumer spending is about done. As many firms reported increasing stocks as reported declines, the best reading since 2007. And those reporting stocks “too low” exceed those reporting “too high” by 2 percentage points, one of the best readings over the history of the survey. Stocks are lean and more firms plan to add to stocks than plan to reduce them.
Reports of capital spending continue to improve, although the percent of owners characterizing the current period as a good time to expand fell and remains low. Over the 4 years of recession and weak recovery, stuff wears out, roofs leak, etc. and this prompts more capital spending. But there is no exuberance there as plans to make outlays in the future fell a bit.
Bottom line, the economy is holding on to tenuous gains, moving ahead in fits and starts which, hopefully, average out to a positive growth number. First quarter growth will not likely match that of the fourth quarter, 2011, but will remain positive. In the meantime, we will crawl toward the November election to get a clearer picture of our future.
Posted: March 13, 2012 Tuesday 07:30 AM