December 2018 Small Business Optimism

Small business optimism continued waning according to data from the National Federation of Independent Business.  Their 10-component index slipped to 104.4 from 104.8 in November.  After starting a new uptrend in November 2016, this indicator moved steadily ahead until September of last year.  Now, it has declined for four consecutive months.

Six of its ten components declined to end the year.  Just a net 16 percent believe the economy will continue improving, a drop of six percentage points.  The net number of those believing now is a good time to expand declined five percentage points to 24 percent.  Plans to make capital outlays are suffering as well, declining four percentage points to a net 25 percent.  Earnings trends were setback three percentage points to a net minus seven percent.  Expectations for higher sales and improved credit conditions were each down one percentage point to net tallies of 23 percent and minus six percent respectively.

Fortunately, it wasn’t all doom and gloom.  Plans to increase inventories went up six percentage points to a net eight percent.  Current job openings rose five percentage points to a net 39 percent.  The net percent of owners describing current inventory levels as “too low” gained four points to a net minus one percent.  Finally, plans to increase employment were up one percentage point to a net 23 percent.

This look at Main Street America is worsening.  However, it is still relatively high compared to pre-2017 levels during the current expansion.  More deterioration is needed before Atlas believes a red flag should be raised, but four consecutive declines have us clutching our yellow pennant.