Fall arrived literally this month, as small business optimism dropped from 93.9 to 91.6, largely due to a precipitous decline in hiring plans and expectations for future small-business conditions. Of the ten Index components, seven turned negative, falling a total of 27 percentage points. The stalemate in early October over funding the government as well as the failed “launch” of the Obamacare website left 68% of owners feeling that the current period is a bad time to expand; 37% of those owners identified the political climate in Washington as the culprit—a record high level.Is Lack of Credit an Issue?
NFIB chief economist Bill Dunkelberg: “Small employers are not fooled by headlines announcing record high stock market indices; everyday they live the economic realities of overregulation, increased taxes, weak sales and a government without any direction or plan for the future. The average value of the Index since the recovery started is 91—8 points below the thirty-five year average through 2007 and well below readings typically experienced in a recovery. The new budget deadline of January 15, 2014 is approaching quickly and Congress continues to wrangle over the disastrous healthcare law and little else. We shouldn’t expect skies to turn blue anytime soon.”
The short answer, as I have commented numerous times before, is "no".
Six percent of the owners reported that all their credit needs were not met, unchanged from September. Twenty-eight percent reported all credit needs met, and 53% explicitly said they did not want a loan. Only 2% reported that financing was their top business problem. Twenty-eight percent of all owners reported borrowing on a regular basis, down 2 points and a record low. A net 6% reported loans “harder to get” compared to their last attempt (asked of regular borrowers only), up 1 point from September. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative 8 percent, 1 point worse than September. A surprising result in an economy with the most aggressive monetary policy in history.Commentary by Chief Economist Bill Dunkelberg
Typical of the reporting by the “mainstream media” on the economy, CNN (Your Money, Nov 2) asserted that stingy credit was dragging down the small business sector; no mention of the impact of Washington antics. Banks are once again being blamed for the slow recovery, not the Administration’s policies (or lack thereof). However, only 2% of NFIB members cite credit and interest rates as their top business problem, and a record 66% expressed no interest in a loan, obviously due to their dismal view of the future of the economy. It’s not a problem of credit supply; it’s a lack of credit demand due primarily to poor economic prospects. Consumer sentiment is sympathetic to that notion as optimism posted declines in October, signaling that customers are less optimistic as well.For numerous charts and other analysis, please see the 23-page NFIB November Report.
The healthcare law is revealing itself to be everything opponents feared. But what else could be expected when a few hundred people (in one party) decide to restructure 15% of the economy. Nobody read the bill, nobody understood the whole thing, the big picture. Now, as it dissembles, a panicked Administration is throwing even more tax dollars at the project in an effort to stem the hemorrhaging. No surprise in Washington, apparently firms that supported the Obama campaign were awarded contracts for most of the work. Kind of like giving Ms. Pelosi’s husband the exclusive right to dispose of our unneeded post office real estate - what a deal.
Mike "Mish" Shedlock