The National Federation of Independent Business (NFIB) released its monthly Small Business Economic Trends (SBET) survey, and the outlook for small businesses is still not good. The NFIB counts its membership at about 350,000 small businesses.
The overall Optimism Index declined in the month of March to 86.8, roughly the same level it was at the very tail end of 2008 (87.8 in November â??08, when the world was on the brink of collapse):
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> NFIBâ??s economist, William Dunkelberg, commented as follows:
While news about the economy has been positive for two or three quarters, small business owners remain quite pessimistic about the future for the economy. The Optimism Index has been below 90 for 18 consecutive months and below 90 in all but four months since the recession started in January of 2008. [...]
Since small firms produce half the private sector GDP, it is hard to envision a sustained recovery without their participation. Once the gains from inventory rebuilding are exhausted, it is hard to see what will fuel growth. Small firm capital spending is at 35 year low levels and plans for future expenditures are equally low. Plus, hiring plans remain "negative"? as more firms still plan reductions than increases in their employment).
Unfortunately for small businesses, their larger counterparts enjoy (at least) three distinct benefits that they donâ??t:
Small businesses overwhelmingly continue to cite â??Poor Salesâ? as their number one problem:
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> I agree with Dunkelberg: Barring a turnaround for the nationâ??s small businesses, itâ??s hard to see how this â??recoveryâ? will have much sustainability or make a dent in the ~8.4 million jobs weâ??ve lost since the recession began. The problem, I believe, is how to stoke final demand (hence the â??Poor Salesâ? problem), without which not much progress can be made.
â??The problem, I believe, is how to stoke final demand (hence the "Poor Sales"? problem), without which not much progress can be made.â?
Even that may not be enough.
http://www.ritholtz.com/blog/2009/09/total-10-year-job-gains-negative-203k/ Remember this one?
Last year was bad, this year looks atrocious.
Small businesses obviously donâ??t matter in the Potemkin economy. Unless theyâ??re publicly traded stocks, theyâ??re invisible to the Fed and powers-that-be.
Theyâ??re the only entities now competing in a quasi-â?free market/capitalistâ? environment. And theyâ??re not â??where the money isâ?, so our politicians couldnâ??t care less.
Thanks for this post and the charts. I believe these NFIB numbers, and the accompanying economic situation, are highly significant.
The entire press release is worth reading. One item that stood out is the following quote, â??Widespread price cutting continued to contribute to reports of lower nominal sales.â?
Of course, lower revenues and lower profitability are not a good combination.
The persistence of poor (or in many cases no) revenue growth among both these smaller firms as well as larger ones is a very significant, and overlooked, situationâ?¦
http://findarticles.com/p/articles/mi_m1094/is_n3_v29/ai_16124708/
This is also interesting as far as job creation is concerned. Manny is right, small businessâ??no lobbiesâ??no one gives a shit in Washington. Theyâ??re wrong though.
Just to point out that this same survey has been telling us for months, for years in fact, that a shortage of credit is the *very last thing* on small businessesâ?? list of constraints.
http://www.asymptosis.com/the-sky-is-falling-business-lending-down-1-2-percent.html
If lending is down, itâ??s because businesses arenâ??t asking for loans. From the press release:
â??Two percent characterized the current period as a good time to expand facilitiesâ?
â??89 percent of the owners reported all their credit needs met or they did not want to borrow. â?
The â??credit crunchâ? is a Wall Street-promulgated myth â?? there are oceans of cash out there looking for truly productive investments, and turning to gambling in frustration â?? one that I wish Big Picture would do more to puncture.
Why should anyone be surprised by this? Small business really falls into two categories â?? either construction contractors or sub-component manufacturers. Construction across the board â?? residential and commercial â?? is in the tank and wonâ??t be coming back soon. So, all of those folks who worked on houses or office buildings are scrounging for work of any sort. The sub-component manufacturers used to produce the myriad parts employed in the production of things, like cars and household appliances. Anybody who used to make auto interior components, the specialty parts used in the engines and drive-trains, the electrical and mechanical systems used in appliances are huffing vacuum right now. Worse, since the multi-national corporations who used to contract with them have shifted their supplier stream to somewhere in Asia, these small firms will never recover before the currency adjustments necessary to allow their survival occur because of geopolitical concerns.
Who on Obamaâ??s advisory team has had any practical work experience outside of the public sector?
Similar to the old proverb of asking the blind man to describe an elephant merely through touch, your asking a group of individuals to revitalize a small business sector from which they have had no exposure to and that they have little idea of how it operates. Forecast: rough seas ahead.
re credit â?? â??the net percentage of companies expecting credit conditions to get easier in the next 6 months fell back to previous lowsâ? from â??Small Business IS a Big Dealâ? http://annaly.com/blog/2010/04/14/SmallBusinessIsABigDeal.aspx (hattip: ms. karen)
@lugnut
exactly. exactly. exactly.
Much of the current (and former) economic advisory teams in America seem to treat small business as invisible.
Its because tanning salons, independent contractors, restaurants, et al â?? donâ??t have lobbyists. Thatâ??s only for big business and big labor.
I think half the gains of large corporations are simple accounting shifts/tricks. Those of us who canâ??t play with monopoly money are down and not getting better quickly, for sure.
They donâ??t sell things people want.
As I posted yesterday:
From Fed Lacker:
"Tight credit often gets the blame for holding back small-business expansion these days, but according to a recent survey by the National Federation of Independent Business, weak sales are by far the No. 1 problem facing small businesses,"? Lacker said.
As I've been saying, our business had its worst March in nine years. Also, as I've been saying, all the other small business owners I meet/work with said the same. I was called out for posting that so at least we're seeing some confirmation that I'm not completely insane.
Maybe the big retailers are seeing gains but us little guys out here are struggling. We simply donâ??t have the pricing power to slash as they do.
And yes, VennData, we do sell things people wan.
@Harry:
Out of curiousity, a couple of questions:
Are you an NFIB member? Have you ever participated in the monthly survey? What sort of small business do you own, and how many employees do you have?
Iâ??m fascinated by the small company/large company decoupling weâ??re seeing, and would love to hear first hand from a small business owner as to what s/heâ??s seeing out there.
Soâ?¦ no small business growth, no homebuilding, no job increases and declining state sales collections and yet we are in a recovery? Fascinating.
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