December Small Business Optimism Is Out, And We're Still Clearly In A Stealth Recession

The latest issue of the NFIB Small Business Economic Trends is out today (download PDF). The heavily watched Small Business Optimism Index rose from 91.7 to 93.2. Here’s the opening paragraph of the report:

The Index of Small Business Optimism gained 1.5 points in November after a 2.7 point gain in October, rising to 93.2. Still, the Index remains in recession territory. Consumer optimism measures grudgingly gave up modest improvements as did the Index, but nowhere is there evidence of a “surge” as experienced in 1983 after the deep recessions of 1980-82.

The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualise that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings of the past three years. The NBER declared June 2009 as the official end of the last recession, but the recession mentality still pervades the small business community.


The next chart is an overlay of the Business Optimism Index and the Conference Board Consumer Confidence Index. The consumer measure is the more volatile of the two, so I’ve plotted it on a separate axis to give a better comparison of the volatility from the common baseline of 100.


Perhaps the next Conference Board consumer confidence report, to be released on December 28, will likewise show an improvement.


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