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    US Small Business Confidence Plateaus in February, Reflecting Economic Uncertainty

     

    The outlook of small business executives was essentially unchanged in February amid conflicting indications on the direction of the American economy.

    The National Federation of Independent Business's small business optimism index rose 0.1 point to 98 last month, the third highest score since December's 100.7 match of the October 2007 score.  

    Most of the component indexes reflected the uncertain nature of the U.S. economic recovery.  Small business profits were unchanged at -19.0, as were capital spending plans at 26.0 and expansion plans at 13.0. Sales expectations dropped 1 to 15.0, hiring plans fell 2 to 12 and unfilled jobs rose 3 to 29.0. Inventory gained 2 to 4.0.

    Last Friday's 295,000 gain in February's nonfarm payrolls marked the 12th straight month that the economy has created 200,000 or more jobs with a monthly average of 275,000, the best in more than 15 years.

     The 0.2 percent drop in the unemployment rate to 5.5 percent , the lowest in six and a half years, was due, as has been a large portion of the five year decline from 10.0 percent, to people dropping out of the labor force.

    The labor force participation rate slipped from 62.9 percent to 62.8, just 0.1 percent above the 35 year low. Wage growth remained stagnant, unexpectedly declining to 2.0 percent on the year from 2.2 percent in January. 

    Annual CPI was -0.1 percent in January, the first negative non-recessionary U.S. rate on record. It has fallen sharply from 2.0 percent in July, driven by the more than 50 percent collapse in the price of energy.  

    American economic growth dropped by more than half from the third quarter's 5.0 percent to 2.2 percent in the final three months of the year. Many analysts expect the GDP expansion to further decline to 1.5 to 2.0 percent in the first quarter of this year. 

    The Atlanta Federal Reserve’s economic forecasting model is predicting a 1.2 percent GDP growth rate in the first quarter. 

    Retail sales for February, to be released on Thursday, will be a key indicator of the supposed optimism of the U.S. consumer. The current median forecast in the Bloomberg survey of economists is for a modest 0.3 percent expansion. This would follow two straight months of unanticipated contractions, 0.8 percent in January and 0.9 percent in December.  

    Sales at wholesalers plunged 3.1 percent in January, the largest drop since March 2009 according to the Census Bureau. Wholesale inventories rose 0.3 percent in January directly accumulated from the decline in wholesale purchases by retailers and  ultimately  due to the 1.7 percent plummet in retail sales December and January, the largest since 2009.  Sales volume at wholesalers has now fallen for three straight months--0.4 percent in November and 0.9 percent in December. It is the biggest shrinkage since the recession of 2008 and 2009. 

     Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

    nfib march 10

    wholesale sales march 10

    retail sales march 10

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