Small Business Survey Reveals Cautious Consumers And A New 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 fractionally from 88.8 to 89.0. Here’s a comment from the opening of the report:

The increase is certainly not a significant move, but at least it did not fall. Still, the Index remains in recession territory. The downturn may be officially over, but small business owners have for the most part seen no evidence of it.

The first chart below taken from the report with a line at 100 and some highlights added to help us visualise that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the Optimism Index of the past three years with the readings in 2000-2003 with the collapse of the Tech Bubble.


The next chart is an overlay of the Optimism Index since 2005 with a 91-day moving average of the Consumer Metrics Institute’s Weighted Composite Index, which I regularly monitor here.


The chart suggests that the government’s stimulus measures had a temporary impact consumer discretionary spending but little or no impact on small business sentiment. To paraphrase the new NFIB report, the recession may officially be over, but the Small Business Optimism Index is still in recession territory.


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