NFIB Small Business Index Among Indicators That Downturn In Economy Ahead
Small businesses are no stranger to economic uncertainty following the recession. However, some signals are now pointing to the potential for a downward economic trajectory and a bear market. MarketWatch writer Jeff Reeves notes that as of February, the US stock market had seen a 14% downturn from S&P 500 highs of around 2,100 in November to about 1,800. Though a 20% decline in the market is necessary to meet the technical definition of a “bear market,” stocks are having trouble breaking above previous heights. Additionally, there have been signals of a weaker US economy that is more likely to push stocks lower. Among these indicators, Reeves says, is that the “normalization” about a year ago of Fed policies, which reduces support investors had become accustomed to, and uncertainty is growing. Additionally, Q1 earnings were more pessimistic across industries, Reeves says, with 58 S&P 500 companies providing “negative forward earnings guidance” so far this year. Department store retail in particular “is suffering a 48% earnings decline year-over-year.” This decline in company earnings may be the result of consumer confidence, which Reeves says is also trending down. The April Conference Board reading for consumer confidence indicated “a substantive decline” from March, while the University of Michigan consumer-sentiment index in April had its fourth month of declines. Another troublesome indicator comes from the NFIB’s Small Business Economic Trends report, which in March showed that “small-business confidence hit a two-year low.” In the NFIB’s May report, NFIB Chief Economist Bill Dunkelberg wrote that “small business owners remain extremely pessimistic about the economy, and rightfully so.” He said, “It was a relief to see the Index turn up, ending a long string of declines. However, it’s still down from December 2014 when the Index hit an expansion high of 100.”
What This Means For Small Businesses
There are a host of indications that the US economy is ailing. Unfortunately, small businesses will bear the brunt of any further negative developments that thwart economic growth, such as a bear market.
Additional Reading
Reuters covered the latest Small Business Economic Trends report.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.
