Small Business Sentiment and the Stealth Recession
Courtesy of Doug Short
Optimism rose again in October to 91.7, but remains stuck in the recession zone established over the past two years, not a good reading even with a 2.7 point improvement over September. This is still a recession level reading based on Index values since 1973. However, job creation plans did turn positive and job reductions ceased. The mood for inventory investment weakened a bit even though views of inventory adequacy improved, and an improvement in sales trends produced a marked improvement in profit trends, still ugly, but less so by a significant amount.
The first chart below taken from the report with a line at 100 and some highlights added to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the Optimism Index of the past three years with the readings in 2000-2003 with the collapse of the Tech Bubble.
The next chart is an overlay of the Business Optimism Index and the Conference Board Consumer Confidence Index. The consumer measure is the more volatile of the two, so I’ve plotted it on a separate axis to give a better comparison of the volatility from the common baseline of 100.
The latest Conference Board consumer number is for September with the October value due out on November 30, which, like the NFIB metric, should see an improvement.
