NFIB

Consider the Recession Over
05/ 30/ 2002

by Bill Dunkelberg

The growth in Gross Domestic Product in the fourth quarter of 2001 came in at 1.4 percent (annual rate), much to the astonishment of most economists. This was no surprise to small business owners, however, as the NFIB survey anticipated positive growth.

The actual growth of the economy slowed dramatically in the third quarter of 2000, initiating a period of sub-par growth that ran through 2001. The terrorist attacks occurred just as the economy was ready to grow, according to the NFIB Small Business Optimism Index. The Index rose from 96.5 in January 2001, to 101.5 in August, signaling a resumption of growth. The latest NFIB survey put the Index at 100.3, well above September's 96.3 reading, but still short of the August level.

The slowdown was led by declines in investment spending, offset by an increase in government and consumer spending, including back-to-back record car and house buying years.

From peak readings in 2000, small business plans to increase employment, make capital outlays and add to inventories fell substantially, but still left the measures above "recession" levels.

Since hitting these "bottoms," the Index has added nearly 5 points and hiring plans, inventory investment and capital spending have risen. The net percent of owners expecting the economy to improve by six months after the survey has risen from -16 percent in December of 2000, (signaling the impending recession) to 16 percent in September 2001, to 37 percent in January 2002, a gain of 53 points.

The bottom line is that the "recession" (if we had one) is over. Although growth will not return to exuberant levels soon, it will improve through the year. As bad as 2001 may have felt, it will be one of the best.

NFIB's Small Business Economic Trends, begun in 1973, is the longest continuous survey of small business optimism and conditions. It is frequently quoted by Federal Reserve Chairman Alan Greenspan and national media. Monthly surveys are sent to more than 2,500 NFIB members and quarterly surveys are sent to more than 7,500 members. The few minutes members spend completing the surveys adds to NFIB's stature as the source of the nation's foremost research about small business.

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This article originally appeared in the April/May 2002 issue of MyBUSINESS magazine.

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