NFIB Small Business Confidence Drops To 8 Month Lows, Divergence With ISM "Optimism" Intensifies

Tyler Durden's picture

The NFIB Small Business Optimism index came in at 86.8, a decline from the March's read. As the NFIB itself confirms: "The persistence of index readings below 90 is unprecedented in survey history. “The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Something isn’t sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy.” Main Street America's optimism is at an 8 month low, ignoring completely any sense of optimism the algo, Fed and momo rally may be attempting to generate. "The index has posted 18 consecutive monthly readings below 90.  In March, nine of the 10 Index components fell or were unchanged from February’s not-so-great readings." As for credit condition: "Regular NFIB borrowers (35 percent accessing capital markets at least once a quarter) continued to report difficulties in arranging credit.  A net 15 percent reported loans harder to get than in their last attempt, up three points from February.  However, 89 percent of the owners reported all their credit needs met or they did not want to borrow." Even Goldman Sachs is unable to spin this information in a favorable light.

From Goldman's Jan Hatzius

BOTTOM LINE: The National Federation of Independent Business (NFIB) reported a setback in its index of small business optimism in March, extending a divergence with the indexes compiled by the Institute for Supply Management (ISM).


The NFIB index of small business optimism falls to 86.8 in March from 88.0 in Feb vs. median forecast 89.2.


1. Swimming against the tide of generally upbeat readings on US economic conditions, the NFIB index posted a second consecutive small loss in March.  Since May 2009, this index has fluctuated in a range of 86.8 (which happens to have been the reading at both ends of this interval) and 89.1, in sharp contrast to the ISM's indexes for both manufacturing and nonmanufacturing activity, the former of which has risen fairly steadily from about 43 to nearly 60.

2. No single factor stands out as the reason for the setback, which was small to begin with, but it is noteworthy that businesses expressed more concern about credit conditions and also downgraded expectations for sales in the next six months.

3. We have long expressed some concern that the divergence between the NFIB and ISM indexes could mean that economic conditions are not improving quite as firmly as implied by the standard data, which tend to have a large-firm bias.  That said, the strong upturn in employment as measured in the household survey since year-end 2009 does challenge the persistent pessimism of the NFIB survey.

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Cognitive Dissonance's picture

"The persistence of index readings below 90 is unprecedented in survey history."

There's that word again. I'm seeing it everywhere and in many different types of articles, blogs, books, newspapers etc. We (the collective "we") are so far off the beaten path that we're grasping at straws, anything in fact that looks familiar, in a desperate attempt to reassure ourselves that we're back on track and things are getting better.

Classic denial syndrome.

ZackAttack's picture

I view it as a case of broken instrumentation.

Postal's picture

Everything is unprecedented to those who don't study history.

mikla's picture

+1, and everything is unprecedented if you have the brain of a tapeworm and the memory of a goldfish.

Cognitive Dissonance's picture


I wish it were as simple as labeling everyone and thing who doesn't clearly see what's happening as having "the brain of a tapeworm and the memory of a goldfish". But "they" have you and I by the balls. Think of it this way. You and I are two of 20 in a life boat that is sinking and we need 15 of the 20 to help bail the water out in order to remain afloat. Because of their collective inaction, we can be overwhelmed despite our efforts to save ourselves.

Any person who thinks they can avoid being harmed by the coming economic and social disintegration is either not seeing the situation clearly or is in denial as well. I'm not pointing fingers at you. After reading your comments for some time, you are aware of the Ponzi. But we must either find a way to turn the tide or suffer the very real danger of being swept away. Doing nothing is not a viable or logical option for someone who is aware.

trav7777's picture

Global peak oil is unprecedented.

After USA Peak in 1970, we came across the N Slope and the N Sea and several other supergiant fields.  The sudden relative new "abundance" of energy plus the severing of the Bretton Woods connection to real assets provided some cover for the debt era.

Basically, we consumed the resources in an area and moved on.  Now, we've run out of area. 

Ragnarok's picture

Unprecedented and historic!


Really? Because to me it looks like classic results of the application of Keynesian policies put in place by Keynesian politicians.  Oh, that's right this time the Keynesian is black.  HISTORIC!


Reporter: A historic moment at the White House today as President Obama was the first black President to take a shit in the presidential bathroom.  Truly a moment that will resonate with all Americans.  We will have Al Sharpton and Jesse Jackson's commentary after the break.



berlinjames02's picture

"2. No single factor stands out as the reason for the setback, which was small to begin with, but it is noteworthy that businesses expressed more concern about credit conditions and also downgraded expectations for sales in the next six months."


Hey Jan,

I can sum it up in one word- HEALTHCARE! If you bothered to leave the palace (85 Broad) and interact with ‘Morts’ you might have this insight.


Last weekend I had dinner with my father and several of his friends (all small business owners). All of them had the same concern- how much healthcare will cost them. I said, “Well, you guys don’t need to worry- it only affects businesses with more than 50 employees.”


The one guy responded, “Well, what is the magic number? Some people say 50, some say 25. Who knows what the number is? There were all these back-room deals to get the thing passed, and no one knows what’s in it. How do you prepare for that? Besides, businesses will ultimately get stuck with the bill. You can count on that. Why do you think all those big companies are already creating loss provisions?”


unwashedmass's picture


maybe it is because their customers have no money....and can't buy.....which then, wait for it, means the small business owners are going broke.

psst....can we pass this along to Timmy, Larry and Ben? they don't know this it seems.

farmjohnny's picture

The scairy part is that they (Timmy Larry and Ben DO know about it!

john_connor's picture

Small business is not important in this country as their campaign contributions are a fraction of that contributed by the Squid, JPM, WFC, etc.   Not to mention that small business has never done God's work, ie money laundering for Washington and creating a perma bid in thinly traded capital markets.

Edna R. Rider's picture

I own 2 small businesses.  Our experience with Fortune 500 (or even Global 2000) businesses is that they see little to no growth but generally speaking they say they are doing fine thanks to cost cuts.  Executives are more or less giddy having survived this severe recession.  I speak to 3 CEOs of large companies frequently and they all say the same thing:  growth in emerging markets, no growth in the US or Europe.  I hear the word "fine" about 20x a week.  In my 25 years at this I have always thought "fine" meant "pretty damn good; a lot better than expected."  Most of the small businesses we work with are at best breaking even.  Most of them have shifted away from invention and do consulting (in my view, this = death for any economy--of course except for Larry Summers, consultant to the hedge fund stars).  All their employees are pissed but have no options.  All the small business owners believe they WAY overpay the good employees.  All of them want long-term deals with large customers at little to no margin.  It feels like the entire global economy is in this game of extend and pretend.  Biggest fear of all the big execs?  Competition from Asia?  Ha.  They all have 90% of their invention done in Asia already, how could they worry about competition?  No their biggest fear:  politicians changing the rules and making them less rich.

John McCloy's picture

   Cramer was on the Today show this morning pumping the markets trying to lure mom and pop back in. Wall Street must be getting increasingly desperate since this whole rally was predicated upon them buying and unloading to retail and mutual funds and the data is indicating mom and pop are out and likely not returning. This pump only works until one of the large banks distrusts the other and unloads ahead of the others.

Cognitive Dissonance's picture


Thanks for pointing out that there is a herd within the herd and the Ponzi presumes the smaller herd can control and direct the bigger one. Layer upon lawyer, the onion's secrets can be revealed if we see this as a massive game of chess rather than simply monopoly and begin to think multiple moves ahead.

Jake3463's picture

He can pump all he wants to they either: A) Don't have money to put into the market because they are barely surviving or B) Learned their lesson in 2007-2008 that the system is rigged and aren't handing it over to their brokers.

I had an investment advisor come door to door trying to drum up sales last week, I alwasy like to tell them what my previous job was and watch them shrink away.  I was a compliance auditor for a financial service firm.

That being said, I've heard of cold calling, never heard of Investment advisors turning to the same tactics as the driveway pavers.


Cognitive Dissonance's picture

Desperate men will do desperate things.

Speaking of driveways, I was in the neighborhood paving a large driveway down the street and I have some asphalt left over. Have I got a deal for you.

John McCloy's picture

I maintain that the reasons for this markets illogical moves is simply they are fighting for their survival and relevance. As it is turning out Americans can lose their own money just as well and these walking egos. In the old days they were reliant upon high commissions from investors and insider information. Now platforms like E-Trade & Scotttrade have deteriorated that revenue. Their research has been exposed as self interested drivel with the sole purpose of luring money in for them to exit at higher prices. Their desperation for profits forced them then conjure up these complex financial instruments and begin to speculate and steal wealth well into the future. In order to maintain high profits & Bonuses you need a either volatility or equities to infinity so they tapped into the middle class directly using Cramer as a trojan horse who wishes only to assist "you" in making money. It is no coincidence that the markets went parabolic from 10k -14k after Cramer when on the air. I am beyond grateful that sites like Zerohedge exist so we can finally have a greater understanding of that "odd" feeling in our conscience that we know is present but cannot explain. Zero Hedge is the best financial education I have ever received and when I graduate college this year the comments and articles I have read on here far surpass any of the propaganda I have read in my textbooks.

Robslob's picture

Maybe the rail traffic is down due to all the Wall Streeters and Banksters now taking Helicopter commutes to salute and in honor of Helicopter / Zimbabwe Ben and company?

Dixie Normous's picture

Small businesses are BOOMING in my neighborhood.

Of course they are seasonal jobs (landscaping, house painting, etc...) and they are just prepping homes to sell.

trillion_dollar_deficit's picture

This should be retitled "Small Businesses Choke on the Realization of Obama's Healthcare Boondoggle".

hedgeless_horseman's picture

Small business owners with under 50 employees that have been providing health insurance are dumping coverage.  Why pay twice, though premiums and taxes, in this job market?

You mean you are not paying for my health insurance anymore, and Obama is going to fine me if I don't buy my own health insurance?

Change, bitches!!!!!!!!!!

RunningMan's picture

To add to CDs comments, which I believe are on the mark, I see less evidence of people working together, and more every man/woman for themselves. Hard to get the 15 required people to work together and bail when they are too busy trying to just keep their own feet dry, not realizing the lifeboat is going down. The more I see that, the more it makes me think it is time to just get out and swim. But the water is awfully cold.

Wait, what were we talking about?

Jake3463's picture

The only small businesses doing well are cheap bars, because that is where the unemployed go to drown their sorrows after a day of sending resumes out.

Village Idiot's picture

Value of "squalid" bars skyrocket in 2010.

glenlloyd's picture

I would select main point #3 above as being the most blatantly ignorant. Reason: it uses statements like, "strong upturn in employment," and "not improving quite as firmly..." which are both completely inaccurate statements.

These people clearly don't live in the real world.

trav7777's picture

This is the bifurcation of the economy.

Those connected to the gov't bailout tit are doing well and highly optimistic, and their executives got bonuses and raises for surviving.

Those not connected?  Hey, yeah, fuck you.  They're suffering. 

Those dependent upon actually producing things, not so good.  Those dependent upon gov't money and connected to the financial complex or subsidies?  Much better.

Assetman's picture

This, I can agree with to a great extent.

I find it a little incredible that smaller business have been treated almost like an ugly stepchild from this administration-- especially when these businesses are the source of core employment growth.

If small businesses are losing confidence, there is not likely to be net hiring.  And as mentioned above, large businesses are making good profits primarily through cost cutting. 

I think the bigger issue right now, perhaps, is that large publicly traded firms have little trouble getting financing in this bizarre market environment that is blindly rewarding "riskiness".  Small businesses, on the other hand, are generally having a very hard time getting incremental investment capital, because their source (bankers) are still trying to fix their black holed balance sheets.

If there were "connected" business that actually produced something useful, that's one thing.  But when there have been hundereds of billions thrown at large complex firms that don't create anything of lasting value-- well-- little wonder small businesses are not confident.  I'm sure some are mad as hell as well.

Ned Zeppelin's picture

Added to lexicon: The Bifurcated Economy.

Wall Street Thieves and The Rest of Us.  Trillions for them, not a cent for us.


Leo Kolivakis's picture

From Yahoo Teck Ticker:

For the first time in 18 months the DOW opened this morning above 11,000. Meanwhile, The National Federation of Independent Business (NFIB) said its monthly index of small business optimism fell again in March for the 18th consecutive month.

"I think there's a huge disconnect between the stock market and the real economy," says Lynn Tilton, founder and CEO of private equity firm Patriarch Partners. With a portfolio of more than 70 small and mid-sized businesses, many of them manufacturing companies, Tilton has a strong understanding of Main Street. Having previously held varied positions at a number of Wall Street firms, including Goldman, Oppenheimer and Morgan Stanley, she also understands that world. 

Liquidity is plentiful on Wall Street but small and mid-sized businesses are still dealing with a "huge credit crisis," she tells Aaron and Henry in the accompanying clip. "If we didn't lend to our own [portfolio] companies we’d be in huge trouble."

The NFIB survey backs that assertion; two key components, 'Plan to Hire' and 'Increased Capital Spending,' fell.

Tilton points to the growing reliance on trading on Wall Street as a cause of the problems with the 'real economy.'  The percentage of business from traditional businesses like IPOs, M&A and debt offerings -- which support broader economic activity -- are shrinking, she notes, while revenue from proprietary trading grows, benefiting few beyond the trading floor.

Ned Zeppelin's picture

I was going to holler for you, Leo.  This NFIB report is reality. Maybe the entire show can be buoyed on the shoulders of the thieving, but thriving financial sector and a few multinationals - those sectors are doing OK. But the rest is in the shitter and I can assure you from my little perch here in SE PA where Bill Dunkelberg sits  - also another no B.S. Philly boy like me  - who says no dice, this thing is still stuck in the mud.  Two diverging realities - one catered to by the politicians whom they have acquired, and the other forlorn and forgotten. 

Racer's picture

So how come the bls add all these imaginary jobs each and every month for these businesses???