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Guest Post: NFIB: No Improvement In The Domestic Economy

Courtesy of Tyler Durden

Some follow-up thoughts from Thermidor on the largely disappointing NHIB data we disclosed earlier:

When I was traveling a few month ago I gave a presentation called “As Good As It Gets” in which I outlined how I believed Q2 would mark the cycle high in the global economy as the inventory cycled peaked. I then showed a few charts relating to the National Federation of Independent Business survey, which outlining why I so was so concerned about the sustainability of the recovery in the US. Well the NFIB survey was out this morning so I thought I’d see if the outlook had changed? Unfortunately, the survey that covers 99% of all US firms and claims that its members have created 65% of all jobs since to 2000 still just looks crap.

The most startling observation is the MASSIVE divergence between small businesses i.e. the NFIB and large players represented by ISM. Indeed, the difference is unlike anything we have seen in the last 35yrs. However, I believe it’s explainable by a few factors.



1) Small firms are telling you that they still can’t get access credit. Indeed, the credit question in the NFIB survey has remained stuck between -12 and -16 since the lows of 2008. This month it printed -12.



2) Small firms have a harder time participating in the “global rebound” and are mostly domestically focused. PS if you chart Michigan consumer confidence vs. NFIB it’s the same chart and the bounce is pathetic off the 2008 lows. The domestic US economy is still CRAP



3) Small firm’s participation in the inventory rebound has been modest in comparison to their big brothers and indeed is now rolling (see chart). This tells me that small firms aren’t going to support the continued inventory rebound that Norbert Ore the head ISM hoped for a couple of months ago. Indeed, I’d point out that in 2008 small firms appeared to have been far better at managing their inventories that the big boys, who if anything were wrong footed going into the recession (see green circle). It appears they maybe the better indicator again.



PS The NFIB inventory question at these levels implies ISM inventories of 40 (see dotted red line) and that implies ISM headline of 45!

NFIB vs. ISM …one hell of a divergence

The inventory divergence


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