Research >> Economics
NFIB Small Business Optimism Index gained 0.8 points to 96.1
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The Small Business Optimism Index gained 0.8 points, restoring the August reading of 96.1, either a strong recession reading or a weak expansion reading, no clear direction. The average of the Index from 1974Q4 to 2014 to date is 98, which includes all the Great Recession readings. The responses to the ten Index component questions would have to improve by a net 20 percentage points just to get to the average. Overall, the Index and its components anticipate more of the same, for employment growth and for Gross Domestic Spending (GDP less exports), a more relevant measure for small business owners.
Voters and non-voters sent a clear message last Tuesday. For those who voted, most didn’t approve of the status quo. For those who didn’t vote, they weren’t persuaded to endorse any candidate. The question is, how much can the Republicans get done with the President holding his veto pen at the ready. Some of his supporters have counseled him to veto everything the Republican Congress sends his way. That would certainly be bad for the economy. There are over 300 bills sitting in the Senate that were passed by the House over the past 6 years, many by bipartisan majorities. But, if the President won’t negotiate, all Congress can do is pass them and send them to the Oval Office.
In his campaigning, the President touted his economic record. Apparently he and with many of us, can’t remember what “good times” really look like. The economy grew at a surprising 3.5 percent pace in Q3, distinctive in comparison to the 2.2 percent growth recorded to date in this expansion. However, the domestic economy did not enjoy that much strength, with Gross Domestic Expenditures (GDP-Exports) growing only 2.1 percent and consumer spending advancing at a 1.8 percent pace, down from 2.5 percent in the second quarter. Job gains remained mediocre but steady, touted by many as good, but those unemployed since 2007 would not share in the applause. Net exports added 1.3 percentage points to the growth rate great for the big firms, but the latest trade data now indicate a downward revision of 0.5 percentage points. The surge in government spending, mostly in defense, added 0.8 percentage points, but is not likely to repeat next quarter. So the basic domestic economy remained operating in the 2.2 percent growth range, and that’s the economy that matters to small businesses. It will be interesting to see if there are any “psychological” impacts after the election. Obviously there are about as many disappointed voters as happy ones. But business owners who characterize the current as a “bad time to expand” their business have blamed the “political climate” at elevated rates, second only to blaming the weak economy. It will be interesting to see if this abates in the November survey, and even better, if there are signs of renewed strength in capital spending plans.
Posted: November 12, 2014 Wednesday 07:30 AM