NFIB Small Business Optimism – October 2014

The October NFIB Small Business Optimism report was released today, October 14. The headline of the Press Release is “NFIB:  Small Business Optimism Index Declines in September. ”

The Index of Small Business Optimism decreased .8 points in September to 95.3.

Here are some excerpts from the Press Release that I find particularly notable (but don’t necessarily agree with) :

September’s optimism index gave up 0.8 points, falling to 95.3. At 95.3, the Index is now 5 points below the pre-recession average (from 1973 to 2007). Four Index components improved, six declined.  Two declined by 10 points total, accounting for the entire decline in the Index score.  Unfortunately, the two that fell drastically were job openings and planned capital outlays, which are directly relevant to GDP growth and hiring.

also:

Sales.  The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past 3 months compared to the prior 3 months deteriorated 2 points to a net negative 4 percent. Fourteen percent cited weak sales as their top business problem, one of the lowest readings since December 2007, but up 1 point from August.   Expected real sales volumes posted a 1 point decline, falling to a net 5 percent of owners expecting gains after dropping 4 points in August.   Overall, these readings are more like a recession period than one of expansion.

also:

Inventories. The pace of inventory reduction accelerated, with a net negative 7 percent of all owners reporting growth in inventories (seasonally adjusted).  Clearly firms are liquidating stocks faster than adding to them.   With sales trends weakening, the reductions in inventories are not surprising.

The net percent of owners viewing current inventory stocks as “too low” improved a point to a net negative 0 percent, a very balanced reading. Sales trends continued to deteriorate a bit but remained near the best levels in the recovery, just historically weak.  Expected real sales did not improve, and this contributed to less urgency to rebuild stocks.  The net percent of owners planning to add to inventory stocks rose 1 point to a net 2 percent.  While inventory accumulation can add to GDP growth, there isn’t much “juice” in the small business sector to contribute.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the October 14 Doug Short post titled “Small Business Optimism Drops“ :

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Further details regarding small business conditions can be seen in the Small Business Economic Trends document as well as the full October 2014 NFIB Small Business Economic Trends report (pdf).

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1874.74 as this post is written