Thursday, August 13, 2009

From Invictus: No Green Shoots in NFIB Report

No Green Shoots in NFIB Report

The National Federation of Independent Business (NFIB), the “voice” of small business in America, issues a monthly Economic Trends report on the second Tuesday of every month, meaning we got one this week. The news was not good. I was going to dissect it myself, but David Rosenberg has spared me that effort, commenting on it in Wednesday’s research piece:

The National Federation of Independent Business releases a small business sentiment index every month that works somewhat like the ISM index — and it fell in July to 86.5 from 87.8 in June and 88.9 in May; and now at its lowest level since March (curiously enough, when the market was making its lows). Not only that, but it was the fifth weakest reading in the past 30 years! Recall that this index led the peak in the ISM during that failed rally in early 2002 by a good three months.

Other interesting results from the July NFIB report :
• The job openings subindex fell to 9 from 11 in June
• The net percent of firms expecting the economy to improve swung from +7% to -3%
• The index measuring corporate profit growth from the prior quarter eroded to -45 from -42. So companies may be beating their low-balled estimates made back on July 1st, but profits are still in decline.
• The net percent saying inventories are too low barely budged, to -4 from -5; the net share saying they have been adding to inventories stayed at a record low -27 in July; and the index measuring plans to boost inventories went to -5 from -6. Where exactly is this supposed big inventory build? We know that the economics community sees the 1.7% plunge in June wholesale inventories as a bright spot since it makes the 3Q inventory “bounce” that much more of an appealing story; however, it may be the case that companies have no intentions of bolstering their stockpiles and are quite content leaving them at their current “tight” levels relative to sales.
• Job hiring intentions slipped to -3 from -1
• Pricing power is non-existent; the net share of firms raising prices slipped to -19% from -17%.
• As a result, top-line revenues are still deflating; the net share reporting improved sales over the prior quarter stayed at a record-low -34.
• Credit spreads may have gone from Armageddon levels to just plain old recession levels, but small businesses are still having a tough time accessing credit. The index measuring credit being harder to get actually rose to 15 from 14 and is still near an all-time high.
• In terms of the most important problems facing small businesses today, 32% said “poor sales” (by far the greatest concern), 22% said taxes, 12% said government regulation. Only 3% cited inflation and 4% mentioned labour costs as their top concern.