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NFIB Small Business Optimism Index declined 5.6 points to 87.5
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The Index of Small Business Optimism declined 5.6 points, one of the largest declines in survey history. The Index has been lower only 7 times since the monthly surveys were began in 1986. Prior to 1986, just two readings were lower, in 1975Q1 and 1980Q2. There were two major events shaping the November results, the election and hurricane “Sandy.” What is quite clear from the data is that the election was the primary cause of the decline in owner optimism, not the hurricane, although hurricane effects were apparent.
Apparently the level of uncertainty was not resolved in a way that was supportive of many small-business owners. Out of 377 surveys since the first in 1973, the current reading of the Index of Small Business Optimism is the tenth lowest on record. The decline in the Index from already recession level readings in October was one of the largest on record. Something bad happened, and it wasn’t Sandy based on the NFIB survey data for November, it was the election. Owners in the rest of the country were as bummed out as those in Sandy states.
Some things are more certain, the healthcare law will not be repealed as advertised. The “war” on success is now public policy as the President insists on higher tax rates for the “rich,” those making $250,000 or more. He continues to obfuscate by claiming that only 3 percent of smallbusiness owners will be impacted, as if even those are not a concern. But the disingenuousness of that statistic masks the fact that the denominator in his fraction is “30 million small businesses.” But, there are, according to Census, only 6 million employer firms, so an accurate assessment of the percentage of employer firms impacted is more like 15 percent. The President claims that there is not enough revenue in restricting deductions; that eliminating charitable deductions would, for example, put hospitals, universities etc. on the verge of collapse. This assumes that people only give for a tax deduction; this would be news to the Red Kettle Salvation Army collectors! They don’t hand out receipts, and even donors in the highest tax bracket still have to pony up over 60 percent of any gift out of their own pockets. Charity is not about tax breaks, it about doing good things. Meanwhile, new and proposed changes in regulations proliferate at record rates.
The growth in the third quarter was revised up from 2 percent to 2.7 percent. The bad news was that most of the upward revision was in inventory accumulation, government spending and an improved trade deficit, unlikely to be as supportive in the fourth quarter. Consumer spending was revised down substantially as the NFIB sales reports indicated, and there are no signs of improvement. Spending on services was revised down to 0.3 percent and this is 70 percent of consumer spending and a sector that is dominated by small business (education and health care aside). Consumer sentiment (University of Michigan/Reuters) crashed, whatever the cause, it does not bode well for consumer spending. For the millions of unemployed held captive by Washington politics, it will not be much of a “Merry Christmas.”
Posted: December 11, 2012 Tuesday 07:30 AM