No Joy In NFIB Report
The National Federation Of Independent Business reported on their Small Business Survey this morning which came in slightly higher than last month at 90.2 versus 88.9 in September and still lower than the year to date average of 91.1 and only slightly better than the average since January, 2009 or 89.1. While the index has improved mildly over the last couple of months from the lows of this year of 88.1 in August we are still well below the 94.1 reading in January of this year. The reading this month contains a much broader sampling of respondents with 2077 in October versus 729 last month. This is the highest participation this year outside of the January report at 2144 participants.
As was the case in September, the “gain” in the Index was primarily a result of "less negative" views about the prospects for real sales and business conditions. This is not the type of outlook or basis needed for stronger economic growth.
One of the biggest continuing concerns for small businesses is "poor sales" which is the driver for hiring and expansion plans. While consumer spending improved a bit last quarter; prospects for future spending are still dismal. Consumer confidence posted only marginal gains over the last few months and confidence in economic policies remains at 50 year record low levels according to the University of Michigan’s consumer confidence survey.
There was some improvement in the six-month outlook as well as in current job openings though the report noted that labor market indications are basically flat and do not point to a reduction in the unemployment rate.
Finally, an important indicator about the real future expectations of the economy by businesses is their willingness to expend capital. The report details that capital expenditures remain depressed and says firms have little interest in borrowing money or investing in inventory. This is not surprising as the general outlook by "Main Street" is that the Federal Reserve is “out of bullets” and there is really not much they can do to reduce unemployment.
Rates have reached the inevitable floor and even with rates at historic lows they really have no ability to artificially lower rates much further. The irony here is that even with rates as low as they are the NFIB survey shows that there is no real demand to borrow as there are few investment opportunities in people or equipment and no payoff with due to a lousy economy.
All in all while there was mild improvement on the surface of the report there was really no substantial change to the outlook of the report that would change our view on the economy ahead. Any exogenous shock at this point from Greece, to Italy, to a Eurozone recession or a financial misstep will push our economy into a recession.