Small Business Survey Offers More Stagnation... Or Is It Stagflation?

The National Federation of Independent Business has just released its survey for June, and the overall trend has now dropped for four months in a row.  Some of the conditions are even still considered recessionary, but perhaps the silver lining is that the lower survey data on a relative basis is less of a drop than in any of the recent months.  The reading of 90.8 for June was called “solidly in recession territory.”

Here is where the stagflation fears remain.  Inflation has slowed slightly, partly due to a leveling of gas prices, but the surveyed companies noted that 25% of small firms have reported raising prices in the last three months.  It noted that 16% of the surveyed members lowered prices. The report noted, “Prices are rising again on Main Street and this will feed the Consumer Prince Index measures of inflation…”

The sales expectations have now dropped for 4 months in a row. An outlook of “poor sales” remains the top problem for owners in operating their business.  Only half of the businesses surveyed have made capital spending moves, which is called a historically low average.

Businesses apparently do not want to or do not need to borrow if this is accurate.  While 3% of the survey said that financing was their #1 issue, the report showed that 91% said that all their credit needs were met or that they were not interested in borrowing.

There is actually some good news on the jobs front, at least sort of.  June’s employment growth was weak, but 15% of small firms reported unfilled job openings.  That is a 3-point decrease increase from May and the NFIB said that this is actually an indication that the unemployment rate will ease back below 9% in the late summer or early fall.

The good news here is that the total reading is only down by 0.1-points.  It is still in the red though.  There are some job openings, credit needs seem mostly met, and the rising prices are actually moderating a bit from the peak in May.  It will be interesting to see what the report is in a month after the trends in Europe and the U.S. will be farther down the road.

The NFIB’s full survey is here.

JON C. OGG