Research >> Economics
NFIB Small Business Optimism Index rose 0.2 points to 96.1
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The Index of Small Business Optimism was basically unchanged in September, rising only 0.2 points, this after an August gain of only 0.5 points. So the Index remains stuck at a below average reading of 96.1. Owners didn’t seem to be overly concerned about the antics of the stock market, as optimism did not fall. However financial markets did not offer any encouragement to owners, instead providing volatility that only a trader could like. This produces uncertainty.
The Federal Reserve decided that doing nothing was the best thing for jobs or for “global concerns” or to make LeGarde and the World Bank happy along with all of the equity traders even though the evidence suggests that the Fed can’t impact employment significantly. None-the-less, Chairman Yellen put “jobs” at the top of her policy priority list. Meanwhile, banks can only lend to the best borrowers at the Fed’s low rate structure, believing that the cost of funds will rise and squeeze out profitability before rates can be reset. Savers aren’t interested in lending their money (depositing at banks, etc.) at these low rates. Trillions of dollars of low yield Treasury securities issued over the past 7 years guarantee sub-par returns to savers and investors for the next decade. Interest income is billions below what “normal” rates would deliver and the Fed continues to hoard trillions of dollars in riskless securities that the market would love to have. Cheap money induces investors to make investments that wouldn’t pass muster in a normal economy. Not a helpful set of outcomes.
Owners make it clear that credit availability and costs are not holding them back. Indeed, another NFIB survey shows that 41 percent are significantly distressed about Fed indecisiveness and another 34 percent are “somewhat” concerned.
Consumer sentiment (University of Michigan) fell in September. Nearly 60 percent reported hearing unfavorable news about the economy. Far more consumers think government policy is “poor” than think it is “good” (20 percent vs 44 percent). Over 20 percent of owners who think it is a bad time to expand blame “political uncertainty. Uncertainty is the enemy of economic growth.
Growth has displayed a “herky jerky” pattern, GDP from 0.6 to 3.9 percent, jobs from 245,000 down to 143,000, stocks gyrating as gamblers adjust their bets. In the meantime, economic policy is in disarray, including the Fed’s. What a mess. Only the strongest private sector can continue to produce growth in this environment. If we are growing at a 4 percent rate (second quarter), the strength isn’t coming from the small business sector.
Posted: October 13, 2015 Tuesday 07:30 AM