In December, the first month after Donald Trump's loss, the NFIB Small Business Optimism Index slumped 5.5 points to 95.9, falling below the average Index value since 1973 of 98, and missing expectations of a triple digit print. Nine of the 10 Index components declined and only one improved. Of note, owners expecting better business conditions over the next six months tumbled by a whopping 24 points to a net negative 16%, realizing that a Democrat admin is hardly conducive to small business growth.
“This month’s drop in small business optimism is historically very large, and most of the decline was due to the outlook of sales and business conditions in 2021,” said NFIB Chief Economist Bill Dunkelberg. “Small businesses are concerned about potential new economic policy in the new administration and the increased spread of COVID-19 that is causing renewed government-mandated business closures across the nation.”
Among the notable findings in the latest report:
- The Uncertainty Index decreased 8 points to 82.
- The percent of owners thinking it’s a good time to expand decreased 4 points to 8%.
- Sales expectations over the next three months declined 14 points to a net negative 4%.
- Earnings trends over the past three months declined 7 points to a net negative 14% reporting higher earnings.
What we found most interesting, however, is what small business owners overwhelmingly listed as the single "most important problem." Here, after monthly of complaining about the quality of labor and poor sales, in December there was a new biggest concern: "taxes"...
... with 21% of respondents lamenting the imminent tax hikes under the Biden admin.
Meanwhile, a paltry 2% complained about inflation even as the market is clearly freaking out about rising prices, and the
As David Rosenberg puts it, "NFIB index shows future tax hikes as #1 concern for 21% of small biz owners. All myopic Mr. Market sees is massive gov’t spending – a near-record low 2% cite inflation as the top worry – yet, the Treasury mkt has been scared off by this phantom (not the first time; not the last)."
Rosenberg, a permadeflationist, is wrong: yes, small businesses are rightfully freaking out about higher taxes, but the reason why they don't fear inflation is because they are focusing on the benign type of inflation, the type that helps their margins rise, not the stagflationary wave that is about to be unleashed across the country, which will hurt, not help, small businesses. In other words, the country's small businesses are about to get the double whammy of higher taxes and lower sales, as the US middle class now subsists from one government stimulus paycheck to another.