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US NFIB Small Business Confidence Drops To 88 From 92.2, On Expectations Of 91, At Three Month Low

Tyler Durden's picture





 

Another real-time business index comes in well-below expectations, but nobody cares: all the market is pathetically focused on is that Alcoa "beat" a consensus EPS that it would have missed as recently as a week ago. As for those lucky few who still care about the fundamentals that are pushing the economy right back into the depression, perhaps the chief economist of the National Federation of Independent Business William Dunkelberg says it best: "The U.S. economy faces hurricane force headwinds and the
government is at the center of the storm, making an economic recovery
very difficult.
" Please don't let this prevent robots from gobbling up futures as AA manages a stunningly manipulated earnings beat. Some more on the NFIB from the release: "The
Index has been below 93 every month since January 2008 (30 months), and
below 90 for 23 of those months, all readings typical of a weak or
recession-mired economy. Seventy percent of the decline this month
resulted from deterioration in the outlook for business conditions and
expected real sales gains. Owners have no confidence that economic
policies will fix the economy.
" But who needs reality when you have companies gaming EPS, the FED buying futures, and HFT breaking markets on a regular basis.

The following is the text of the National
Federal of Independent Business' monthly Small Business Optimism index,
published Tuesday:

Small Business Optimism Declines in June

WASHINGTON, July 13, 2010 - The National Federation of
Independent
Business Index of Small Business Optimism lost 3.2 points in June
falling to 89.0 after posting modest gains for several months*. The
Index has been below 93 every month since January 2008 (30 months), and
below 90 for 23 of those months, all readings typical of a weak or
recession-mired economy. Seventy percent of the decline this month
resulted from deterioration in the outlook for business conditions and
expected real sales gains. Owners have no confidence that economic
policies will fix the economy.

"The U.S. economy faces hurricane force headwinds and the
government is at the center of the storm, making an economic recovery
very difficult," said William Dunkelberg, NFIB's chief economist.

Optimism Components Net % Change
PLAN TO INCREASE EMPLOYMENT 1 0
PLAN TO INCREASE CAP. OUTLAYS* 19 -1
PLAN TO INCREASE INVENTORIES -3 -5
EXPECT ECONOMY TO IMPROVE -6 -14
EXPECT HIGHER REAL SALES -5 -10
CURRENT INVENTORY SATISFACTION -1 -1
CURRENT JOB OPENINGS* 9 0
EXPECTED CREDIT CONDITIONS -13 -1
NOW A GOOD TIME TO EXPAND* 6 1
EARNINGS TRENDS -32 -4

*Note: These components are measured as actual percentages of
all
respondents and are not net percentages. A net percentage is the
percent positive minus percent negative.

Employment

Average employment growth per firm turned negative in April of
2007
and has remained negative for 10 of the 12 following quarterly readings
ending with a negative .18 in April (seasonally adjusted). May and
June show no reversal in the bad news, posting average declines of
negative .48 and negative .28 workers per firm respectively.

In June, 9 percent (seasonally adjusted) reported unfilled job
openings, unchanged from May and historically very weak. Over the next
three months, 8 percent plan to reduce employment (up one point), and 10

percent plan to create new jobs (down four points), yielding a
seasonally adjusted net 1 percent of owners planning to create new jobs,

unchanged from the May reading and positive for the second time in 20
months.

Capital Spending and Outlook

The frequency of reported capital outlays over the past six
months
was unchanged at 46 percent of all firms, two points above the 35-year
record low (reached most recently in December 2009). Of those making
capital expenditures, 30 percent reported spending on new equipment
(down two points), 15 percent acquired vehicles (down two points), and
11 percent improved or expanded facilities (unchanged). Four percent
acquired new buildings or land for expansion (down one point), and 9
percent spent money for new fixtures and furniture (down one point).

The percent of owners planning to make capital expenditures over

the next few months fell one point to 19 percent, 3 points above the 35
year record low. Six percent characterized the current period as a good

time to expand facilities, up 1 point. But a net negative 6 percent
expect business conditions to improve over the next six months, down 14
points from May.

"Owners do not trust the economic policies in place or proposed,

and they are distressed by global and national developments that make
the future more uncertain," said Dunkelberg.

Sales and Inventories

The net percent of all owners (seasonally adjusted) reporting
higher nominal sales in the past three months lost four points, falling
to a net-negative 15 percent, 19 points better than June 2009, but still

far more firms are reporting negative sales trends quarter-to-quarter
than positive. The net percent of owners expecting real sales gains
lost 10 points, falling to a net-negative 5 percent of all owners
(seasonally adjusted).

"Hiring and capital spending depend on expectations for growth
in
future sales, so the outlook for improved spending and hiring is not
good," said Dunkelberg.

Small business owners continued to liquidate inventories and
weak
sales trends gave little reason to order new stock. A net-negative 21
percent of all owners reported gains in inventories (more firms cut
stocks than added to them, seasonally adjusted), one point worse than
May. Plans to add to inventories declined five points to net-negative 3

percent of all firms (seasonally adjusted).

Inflation

The weak economy continued to put downward pressure on prices.
Thirteen percent of owners (down one point) reported raising average
selling prices, and 27 percent reported average price reductions (down
one point). Seasonally adjusted, the net percent of owners raising
prices was a negative 13 percent, a two point increase in the net
percent raising prices. June is the 19th consecutive month in which
more owners reported cutting average selling prices rather than raising
them. Plans to raise prices fell three points to a seasonally adjusted
net 11 percent of owners.

Earnings

A net-negative 32 percent of small business owners reported
positive profit trends, three points worse than in June and 28 points
worse than the best expansion reading reached in 2005. The persistence
of this imbalance is bad news for the small business community. Profits

are important for the support of capital spending and expansion.

Owners continued to hold the line on compensation, with 8
percent
reporting reduced worker compensation, and 13 percent reporting gains.
Seasonally adjusted, a net 4 percent reported raising worker
compensation, only six points better than February's record low reading
of net-negative 2 percent.

"In past recovery periods, compensation improved at a much
faster
pace than we have experienced in this recovery period," said Dunkelberg.

Credit

Regular NFIB borrowers (29 percent accessing capital markets at
least once a quarter, a survey record low) continued to report
difficulties in arranging credit. A net 13 percent reported loans
harder to get than in their last attempt, unchanged from May. Overall,
90 percent of the owners reported all their credit needs met (or they
did not want to borrow).

"The small business sector is not on a positive trajectory and
with
this half of the private sector missing-in-action, the economy's poor
growth performance is no surprise," said Dunkelberg. "Small business
owners are not happy about the future of the economy being painted by
the administration or economic events. Confidence is lacking and the
news out of Washington is discouraging. Until this changes, don't expect

small businesses to start hiring."

*The survey was conducted through June 30 and represents 805
small
business owner respondents.

 


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Tue, 07/13/2010 - 08:05 | Link to Comment papaswamp
papaswamp's picture

I wonder what the major corporations revenues looked like in June? The first 2 months of the Qtr were probably rockin as inventory rebuild...but I bet June showed a big slowdown....especially mid June. It will be interesting to se how many change their forcast in August...

Tue, 07/13/2010 - 08:06 | Link to Comment Sudden Debt
Sudden Debt's picture

Give eveybody a pack of Viagra 500, 20 sixpacks of Belgian beer, 10 cardridges of smokes and import all the hot Latin babes from mexico and they'll feel a lot better. I promise!

Tue, 07/13/2010 - 08:07 | Link to Comment Sudden Debt
Sudden Debt's picture

3 years ago, this was the most bullshit indicator on earth and now we start paying attention to it? COME ON!

Tue, 07/13/2010 - 08:30 | Link to Comment Boilermaker
Boilermaker's picture

NEWSFLASH >>>  They are all bullshit indicators now.

Tue, 07/13/2010 - 08:08 | Link to Comment sysin3
sysin3's picture

Everybody knows that bearish statistics have no predictive value.  Only bullish statistics are useful.

Except, gee, I haven't seen any bullish numbers in a while (disregarding headline "beats")

Tue, 07/13/2010 - 08:16 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

Why do you continue to care about small businesses?  They're fine.  They just need to take out more loans.

Tue, 07/13/2010 - 08:16 | Link to Comment TooBearish
TooBearish's picture

Buy  buy buy

Tue, 07/13/2010 - 08:22 | Link to Comment Boilermaker
Boilermaker's picture

FUTURES UP!

Portugal downgraded and now this but futures SOAR! 

Fuck this shit.

Tue, 07/13/2010 - 08:31 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

I think everyone now expects to go to 1110 before piling in short again

Tue, 07/13/2010 - 08:38 | Link to Comment Boilermaker
Boilermaker's picture

Have fun with that.  When you play with things that are openly fraudulent then you should expect to be defrauded.

I'm fully with you but this is just not even tradeable anymore, at all.  Period.  It's fucking worthless to be in the 'market'.

Anyway, I do wish you good luck.  I just won't be in the passenger seat of this bullshit ride with you anymore.

Tue, 07/13/2010 - 08:44 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

I think you'll find we're in agreement.

I'm pretty much net neutral at the moment.  I lost way too much money trading based on emotions.  Now is a good time to be on the sidelines, waiting for the carnage to occur, then looking for value. (IMO)

This BS could easily drag on through the fall, or into next year.

Tue, 07/13/2010 - 08:58 | Link to Comment -1Delta
-1Delta's picture

i hope not...

Tue, 07/13/2010 - 09:03 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

The Banksters and their Bitch Timmy G love squeezing shorts on bad data

they love raping and pillaging

they worship Satan, after all

 

Tue, 07/13/2010 - 09:11 | Link to Comment Boilermaker
Boilermaker's picture

It's so fucking obvious, isn't it?

I wouldn't be surprised if they don't have a full and detailed database of all short positions and their stops and then do max damage at will.

You can't beat someone that doesn't have to follow laws yet alone rules.  Of course, it's a dark day in general but these fuckers are not even close to stopping this bullshit.  The bigger problem is that they've been doing it long enough now that they probably can't and won't ever stop.

The volumes continue to decline which, in my ignorant mind, tells me that more and more are exiting the market.  Only a few complicit 'players' are left and, of course, are colluding like fuck.

Tue, 07/13/2010 - 09:09 | Link to Comment Canucklehead
Canucklehead's picture

Put on your small business hat for a moment.  These people are not traders.  They are looking to secure the future of their businesses and ensure their families can enjoy a good life.

Why would you hire/expand now?  The political headwinds around deficit financing and increased taxes could simply swamp you within the year.  A change of direction in the Senate and Congress towards more fiscal responsibility would be seen as a positive sign for small business, who in turn would consider hiring/expanding.

Government debt (Municipal, State, Federal) is the number one issue that needs to be addressed going forward.

Tue, 07/13/2010 - 09:13 | Link to Comment Boilermaker
Boilermaker's picture

From the NFIB spokesman / head this morning on CNBC, the problem is primarily lack of SALES with the political and business environment changes being secondary (or icing, if you will).

Tue, 07/13/2010 - 09:20 | Link to Comment The Franchise
The Franchise's picture

Yeah, we are all in agreement, as is the retail investor, that the markets are completely disconnected from economic/financial reality. While it is frustrating to witness such a disconnect and the nonsensical cheerleading, we can all rest assured that this beast is broken (or perhaps working just as planned?). I speak with high net worth folks on a weekly basis and they now could not care less about the stock markets. All of them are out of the markets for the most part and whatever monies they still have in them are only there because they cannot take them out (trusts, etc). It is as if the entire audience knows the circus is an "act" but the actors keep on acting. The equity markets are nothing more than a washing machine and are irrelevant at this point, and perhaps forever now.

Tue, 07/13/2010 - 09:27 | Link to Comment Boilermaker
Boilermaker's picture

There is only one way to get a square peg into a round hole.  Get a bigger hammer.

The fact is that it's so far detached that the plan won't be stopped.  Everyone is on board and law enforcement is 'gone fishing'.

So, what's the fucking point?

I could be rich a hell also if I could walk into the banks with a gun and rob them with no chance of getting caught or, god forbid, arrested and prosecuted.

Tue, 07/13/2010 - 11:51 | Link to Comment Kali
Kali's picture

Canucklehead and Boilermaker, you are BOTH right.  As a small biz owner, I have been luckier than most.  If I didn't operate w/o debt financing I would be gone already.   My biz has been growing phenomenally the last 5 years, was wondering when all of this would catch up.  Finally went flat in May and June, but no decline.  July numbers are looking abysmal.  Month to date for July, biz down 75% YoY!  With flat, declining revenues and a totally fucked up regulatory environment, rising costs, etc., there is NO WAY I am investing or hiring.  Preserving cash and trying mightily to not lay off any of my employees (Taking a personal wealth hit for that).

The decline enforces the view.  The bizzes I do biz with are in the same boat or worse.  They cannot expand or invest capital in anything right now.

Tue, 07/13/2010 - 15:34 | Link to Comment johngaltfla
johngaltfla's picture

This is going to be one seriously ugly Christmas season, which should be the final stake in the heart of the bulls. Watch and see the August through October transportation reports for a clue. NFIB is dropping their bombs now trying to warn everyone. And CSX's report wasn't as hot as everyone makes it out to be...

Mon, 07/26/2010 - 16:21 | Link to Comment gold_tracker
gold_tracker's picture

This tracks with the elimination of the middle class.

Sat, 08/14/2010 - 10:54 | Link to Comment herry
herry's picture

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