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Guest Post: NFIB: "No Sign Of A Surge In Confidence"
Submitted by Lance Roberts of Street Talk Live,
The latest release of the National Federation of Independent Business Small Business Survey was a bit of dichotomy of interpretation. Econoday stated the following:
Optimism is up among small business owners based on a solid 1.9 point gain in the small business optimism index to 90.8 in February. Inventory building, which is often a sign of optimism, leads February's gain followed by plans to increase capital outlays which is another sign of optimism. Gains are wide across components and also include a rise in current job openings. Despite the month's strengths, the report notes that the index level remains in recessionary ground.
However, while Econoday's economists interpreted the report as primarily optimistic, the NFIB's Chief Economist Bill Dunkleberg had this to say:
"While the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed. Far more firms report sales down quarter over quarter than up. Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the sequester. Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship. Three-quarters of small-business owners think that business conditions will be the same or worse in six months. The Index gained almost 2 points last month; that was good news. But, until owners' forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy."
These are obviously two diametrically opposed views about the same data. Is the inventory increase really a sign of optimism or is it an unwanted buildup as sales have slowed as shown by the latest wholsesale inventory report? Are capital outlays really a sign of optimism or is it simply just required maintenance and upkeep? The interpretation of the data is key to understanding the direction of the overall economy. As we stated in yesterday's report on employment:
"As we have stated, so very many times previously, the problem with long at individual data points is that you effectively miss the 'forest for the trees.' While the mainstream media focuses on one 'tree' to the next, and tries to extrapolate minor improvements indefinitely into the future, for investors it is more important to remain focused on the 'forest.' The overall trends of the data currently paint a very different picture than what we read in the headlines."
Let's take a look at some of the details. While, as Econoday noted above, the optimism index increased by 1.9 points in February to 90.8 - the index remains on par with the 2008 average and below the trough of the 1991-92 AND 2001-02 recessions. This is shown in the chart below.
While February's change was positive there was little indication of a boost to confidence among small-business owners. The expectations of small businesses for improvement in the economy six months in the future range in at a -28 which is only slightly above its historic low of 35 set in November of 2012. Economic confidence still remains at levels lower than in 2011 or in 2008 during the depths of the financial crisis. The chart below shows economic expectations overlaid with both capital expenditure and employments plans over the next six months.
With future economic confidence still at levels lower than ANY past economic recession the recent bump in capital expenditure plans are likely related more to maintenance, upkeep and meeting current demand requirements rather than expansion. While the frequency of expenditures has improved in recent surveys; the levels of those expenditures remain well below what would be characterized as normal growth. This also somewhat explains the recent declines in hiring plans which corresponds very closely with the peak in employment as reported by the Bureau of Labor Statistics.
Concerns for businesses remain weighted toward the consumer and the government. Weak sales, government regulations and taxes are the top 3 biggest headwinds curtailing small business currently. With the upcoming debates over the debt ceiling and the budget it is unlikely that these concerns are going to improve much anytime soon. This bit of commentary from the NFIB well defines the problem:
"The President has crisscrossed the country telling us how many people will be hurt if he has to deprive them of his largess if spending is cut. And he has chosen cuts that will maximize the pain felt by the citizens, refusing the opportunity to actually lead and manage the cuts more sensibly. But he has nothing to say about the pain he inflicts on the producers of jobs that could help those who are unemployed and want to work. That pain is obvious on Main Street, most recently in the reports of the Regional Federal Reserve Banks. His programs are damaging the economy and creating more dependents on his largess while financed by those who make the economy run. He is clearly not in the mood to compromise much even though consumers are not happy with policy. It is not likely that higher taxes and higher energy costs will make them happy. Only 15 percent of consumers in the University of Michigan/Reuters February poll thought government is doing a "good" job, 43 percent a "poor" job. Seventy-six percent of NFIB owners think that business conditions will be the same (ugh!) or worse in six months - not a pretty picture.
The economy is clearly bifurcated, with S&P profits at record levels while GDP posts a growth rate of 0.1 percent (excluding government, growth would have been over 1 percent, still a lousy reading). The small business half of the economy is clearly languishing based on NFIB surveys of its 350,000 member firms. So, the average growth of these two sectors is the growth of the private economy (government excluded) and that's not good. With some evidence that the large firms will not perform as well this year as last, prospects for strong growth this year are not good. Housing and energy will be bright spots for job creation, but can't carry the whole burden of restoring employment to its 2007 level.
But until owners' forecast for the economy improves substantially, there will not be much of a boost to hiring and spending from the small business half of the economy"
In the end it really isn't important whether, or not, you look at the data as optimistic. What is important is positioning your portfolio for what you believe is most likely going to be occur in the near future. As an investor this is the game you play - betting capital on what you believe will be the most likely outcome in the future. If you are right you win - if not, the lesson can be devastating to your long term investment goals.
There is one rule to remember - being overly pessimistic may cost you a short term gain but being overly optimistic may cost you a long term loss of capital.
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Of course "optimism" is up - it's the only thing that consumers and small business owners have left!
I can hope the shit out of this economy as much as I want - it won't change that fact that nothing is in my wallet.
The trend is bearish. We've recently broken through key support levels that had held for decades. Lower lowes and lower highs support the move as well as the fundamentals. People have developed a significsnt tolerance to Hopium and being broke as fuck is a confidence killer as well.
who gives a shit about small business
they dont donate to barry and the banks could care less
small business= 99%ers
Jobs.
80% of jobs created by small business.
Big corporations garner the headlines, but its small business that creates the majority of jobs.
The percentage of small firms (3mo. Avg.) expecting the economy to improve has severely tanked.
Seventy-six percent of NFIB owners think that business conditions will be the same or worse in six months.
When in doubt? Buy stock! How could the "market" be wrong? Sunshine & lollypops la, la, la...
The elites would like you to cheer up. You are harshing their mellow.
They think it's DOWN now, wait till they have to fork over the cash for this.
Gonna be more Americans w/out ANY Healthcare because of OBaMao's AFFORDABLE CARE ACT...........Yeah right.
http://news.yahoo.com/insurers-warn-overhaul-induced-sticker-shock-152538504--finance.html
Use common sense.
This is not a healthy business environment.
Nothing done by this administration had done anything to improve the overall economy.
Sure, the corporate fascist companies are making out ok. But they are not large enough to keep this sinking ship afloat.
unh unh. Lamborghini sales are way up. special interest profiteers are keeping the small business lamborghini dealers goingm, and those things are shipped from somewhere in Euorpe.
yeah, but let's see if Prada and Lambo can keep all of Italy afloat....
Can't you see the recovery? We're making ALL-TIME HIGHS!!!!11!!!!!1!!™, so you're obviously not looking hard enough.
I'm working on an all time high now! Huffing paint like my hero, Jesco White, who taught Bennie B a thing or two about getting an economy high. Clip is worth the click, you'll never be the same again. "I wanted to get all that good stuff in me......."
http://www.youtube.com/watch?v=6FffzU7F6Lc
I thought the president was concerned about the poor? Say it ain't so!
Who cares what small businesses think? Oh, wait, I have a small business. Maybe I should just ask myself what I think.
What do you think, NoDebt?
It sucks.
Thanks for your comment, NoDebt.
Thanks for your comment NoDebt. It may not help, but it is tough everywhere.
America peaks on March 22, 2013 .. according to Armstrong.
We head toward a potential dark age from there... shit.
OK, double dipping on this one. Did anyone think that things would get better for small businesses when politicians started talking incessantly about how to "help" them and how "important" they are to the nation? When the government starts talking about "helping" some group it means helping them right into the ground. "Help" is code for "we're coming to kill you, take your posessions, rape your wife and sell your children into slavery."
I dare you to argue with me about that.
In other words, small businesses have been "liberated" and given the gift of "democracy."
"and they'll drop roses at the feet of USFED liberators.."
or
"break it, you bought it.."
or, and i really like this for Obama
"Mission Accompliced"
Yeah, that's the same ploy they're pulling on the poor, but the poor are too dumb to realize that they're being raped.
I own a chain of retail stores, when manufacturers started shipping one item per box as opposed to packing the box to capacity, I knew these fuckers were juicing their numbers. Last time they pulled this shit was circa '07-'08.
I would complain, but I say fuck it. I'll pass the cost off on the consumer. That's the 'Merican way.
How are those FTAs working out?
Hopefully people will stop going to SprawlMart to buy soap made in Costa Rica and start making it at home. Globalization is dying on the vine (and trying to take down the tree of life with it).
Depends on your definition of small business. Remember John McCain thought anyone earning under $5 million a year wasn't rich. So I'm quite sure many "small" businesses have attached quite nicely to the teat and are doing fantastic.
Kashi cereal just moved from San Diego to Michigan, which is probably the new China in the hunt for cheap labor? in a few years there will be no one left in this state without a government job, but so far the huge story of the year is USG negotiating with the Taliban to keep the war going, so the US can remain in Afghanistan (and keep the military contractors rolling in dough) At the same time corruption stories are hitting the headlines, including one about a chicken processing plant in Iraq we built, which never processed a single chicken. Of course this might be a case of government vs government, one party feeding these stories to the press in order to set the stage for huge military cuts. At this stage in the game DOD cuts would hurt towns like SD, and their shipyard a lot. I'm just not sure who is leaking these stories, and which side wants to drop the axe, maybe both.
It does not matter the specifics, be assured that corruption and waste abounds in all connected to gov't/military.
And here I thought 'confidence' was well over all time highs according to all media blowhorns!
Huh....sounds extrememly bullsih I'm sure....DOW 15,000 we hardly knew ye! Well, that's what everyone will probably by mid next week when they ramp it to 15,500 or so.
I actually think we should cheer on the DOW to 20K, 30K, 40K. Let's make this bubble as big as fucking possible.....because the bigger they are, the funnier it is when they fall down.
Only if your well prepared.