Research >> Economics
NFIB Small Business Optimism Index rose 0.5 points to 95.9
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The Index of Small Business Optimism went nowhere in August, so the good news is it did not fall. Two Index components, job openings and earnings trends both posted a solid 4 point gain, but there was not much action in the remaining components. Five components posted gains, 3 fell and 2 were unchanged. The Index reading of 95.9 was again well below the 42 year average of 98 and is consistent with reported economic growth of about 2 percent for the first half of the year. Owners didn’t seem to be overly concerned about the antics of the stock market, then again, most of the interviews were completed before the big slide and the China’s currency devaluation. In addition, most owners probably have their capital primarily invested in their firms, not other people’s firms.
Washington has made no progress dealing with the issues most important to small-business owners and there is little hope that this Administration will take any action. Instead, the management team continues to demonstrate its incompetence, scandals abound, none are resolved, and the President remains steadfast in advocating that we should sink our economy to reduce pollution while the rest of the world does not. There is little hope this will improve, a dreary backdrop for entrepreneurs trying to plan for the future.
Second quarter growth was revised from an initial estimate of 2.3 to 3.7%. Really, a 60% revision?? Might be time to give up that first estimate all together and wait until more of the actual data are in. The “guesses” are not helpful. The Federal Reserve is dithering again. Somehow they think an economy growing at a 2% rate, which is not great of course, demands a 0% interest rate. Apparently they are convinced that the REAL economy will be substantially and adversely impacted by a 0.25% rate hike. Only in their models will this occur, not in the real world, a place they need to visit more often. Undoubtedly there can be some financial market volatility, but the real economy seems to be oblivious to that, it’s the big financial institutions that push for continued asset price inflation. The Federal Reserve’s inaction just contributes to uncertainty on Main Street where maintaining 0% rates makes no sense, and that is confusing. With so much uncertainty coming from “on high”, few want to risk investing in the future.
Consumers agree, optimism fell in August (University of Michigan) and twice as many consumers said government is doing a poor job as said it was doing a good job. Nearly 60 percent reported hearing unfavorable news about the economy. Consumer spending is 70 percent of the economy, uncertainty here slows spending and growth.
Clearly, from Main Street, there is no basis to expect dramatic second half growth as July and August are already unimpressive. Perhaps the large firms will “carry the water”, but with recessions springing up around the globe, this is unlikely. So the small business sector will continue plodding forward, little risk of recession but little risk of a boom as well.
Posted: September 8, 2015 Tuesday 07:30 AM