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NFIB Small Business Optimism Index unchanged at 96.1
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The Index of Small Business Optimism was unchanged in October, posting no change after a rise of only 0.2 points in September and a gain of only 0.5 points in August. So the Index remains stuck at a below average reading of 96.1. Although the labor market components posted minor declines, they held at historically strong levels but this time owners reported no net growth in employment, a significant decline from reports in the previous four months.
The Federal Reserve decided not to help the economy by surprising markets with no change in the Fed Funds rate in September, adding to the large cloud of uncertainty. Instead the Fed indicated that China and other weak countries needed their support along with domestic players threatened by global weakness. Those concerns are being “walked back” by FOMC members in the face of widespread angst from all quarters. Living in their world of models, QE is supposed to work, hoarding trillions of dollars of risk free assets is supposed to be a “positive”. For some FOMC members, reality has not yet set in. One FOMC member even supports more QE. But, what would that accomplish other than adding to their already unnervingly large portfolio?. Owners make it clear that credit availability and costs are not holding them back. But 40 percent are significantly distressed about Fed indecisiveness and another 35 percent are “somewhat” concerned. More “uncertainty” is the enemy of small businesses. What does the Fed fear that few others seem to worry about?
GDP growth languished in Q3, and will not likely impress in Q4. The industrial sector is weakening and the small business sector has not returned to its historical role in the production of GDP and jobs. The October NFIB survey gave no indication of a resurgence in growth in the small business sector, readings remaining below average.
Consumer sentiment (University of Michigan) rose in October, but only to the second lowest reading for the year, not a great performance. The lowest reading was reached in September. The gain was driven by the low income segment as the top income group was apparently depressed by stock market gyrations. Over 60 percent reported hearing unfavorable news about the economy. Far more consumers think government policy is “poor” than think it is “good” (39 percent vs 16 percent). Over 20 percent of owners who think it is a bad time to expand blame “political uncertainty.
Supporting the views of her former boss, Hillary Clinton now blames the Middle East refugee problem on “climate change”, the cause of all bad things. This remains the “center piece” of President Obama’s policy model and prospects for dealing with tax reform, the rising cost of health care, and the flood of capital-devouring regulations are dim. This will continue to depress growth in Q4 and into 2016.
Posted: November 10, 2015 Tuesday 07:30 AM