NFIB

SMALL BUSINESS

ECONOMIC TRENDS
William C. Dunkelberg Holly Wad

January 2013

Based on a Survey of Small and Independent Business Owners

SMALL BUSINESS OPTIMISM INDEX COMPONENTS
Index Component Plans to Increase Employment Plans to Make Capital Outlays Plans to Increase Inventories Expect Economy to Improve Expect Real Sales Higher Current Inventory Current Job Openings Expected Credit Conditions Now a Good Time to Expand Earnings Trends Total Change Seasonally Adjusted Level 1% 20% - 4% - 35% - 2% 0% 16% -11% 8% -29% Change from Last Month -4 1 1 0 3 2 -1 -1 2 3 6 Contribution to Index Change * * * * * * * * * * *

(Column 1 is the current reading; column 2 is the change from the prior month; column 3 the percent of the total change accounted for by each component; * is under 1 percent and not a meaningful calculation)

SMALL BUSINESS ECONOMIC TRENDS _____________________
NFIB NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since 1986. The sample is drawn from the membership files of the National Federation of Independent Business (NFIB). Each was mailed a questionnaire and one reminder. Subscriptions for twelve monthly SBET issues are $250. Historical and unadjusted data are available, along with a copy of the questionnaire, from the NFIB Research Foundation. You may reproduce Small Business Economic Trends items if you cite the publication name and date and note it is a copyright of the NFIB Research Foundation. © NFIB Research Foundation. ISBS #0940791-24-2. Chief Economist William C. Dunkelberg and Senior Policy Analyst Holly Wade are responsible for the report.

IN THIS ISSUE _____________________
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Optimism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Earnings . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 6 Sales . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 7 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 10 Credit Conditions . . . . . . . . . . . . . . .. . . . . . . . 12 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 14 . Capital Outlays. . . . . . . . . . . . . . . . . . . . . . . . . 16 Most Important Problem . . . . . . . . . . . . . . . .. 18 Survey Profile . . . . . . . . . . . . . . . . . . . . . . . . . 19 Economic Survey. . . . . . . . . . . . . . . . . . . . . . . 20

SUMMARY
OPTIMISM INDEX The Index gained half a point, rising to 88.0, the second lowest reading since March 2010. This is better than the 81 low reading in the Great Recession, but hardly characteristic of a recovery. Were it not for population growth supporting consumption and net new small business creation, we would have no growth at all. LABOR MARKETS Overall, owners reported a tiny increase in job creation, adding an average of 0.03 workers per firm, better than November’s -0.04 reading, but both roughly “0”. For the entire sample, 11 percent of the owners (up 1 point) reported adding an average of 2.9 workers per firm over the past few months, and 13 percent reduced employment (up 2 points) an average of 1.9 workers (seasonally adjusted). The remaining 76 percent of owners made no net change in employment. Forty-one percent of the owners hired or tried to hire in the last three months and 33 percent (80 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions. The percent of owners reporting hard to fill job openings fell 1 point to 16 percent of all owners. This measure is highly correlated with the unemployment rate, so the NFIB survey anticipated little or no improvement in the rate. Job creation plans weakened substantially, falling 4 points to a net 1 percent planning to increase employment. Overall, the NFIB data indicate that job creation was not much different in December, positive but not strong. INVENTORIES AND SALES The pace of inventory reduction continued, with a net negative 10 percent of all owners reporting growth in inventories (seasonally adjusted), unchanged from November. A net 0 percent (up 2 points) reported stocks too low, historically a high level of satisfaction with stocks. But, with rather dismal sales expectations, plans to add to inventories remained weak at a net negative 4 percent of all firms (seasonally adjusted), only 1 point better than November.
1 | NFIB Small Business Economic Trends Monthly Report

The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past 3 months improved 5 points to a negative 10 percent, a step in the right direction, but a small one. The low for this cycle was a net negative 34 percent (July 2009) reporting quarter over quarter gains. Nineteen (19) percent still cite weak sales as their top business problem, historically high, but down from the record 34 percent reading last reached in March 2010. The net percent of owners expecting higher real sales volumes rose 3 points to a negative 2 percent of all owners (seasonally adjusted), 14 points below the 2012 high of net 12 percent reached in February. Not seasonally adjusted, 20 percent expect improvement over the next 3 months (up 1 point) and 40 percent expect declines (down 3 points). This survey was conducted in December 2012. A sample of 3,938 small-business owners/members was drawn.
Six hundred forty-eight (648) usable responses were received – a response rate of 16 percent.

CAPITAL SPENDING The frequency of reported capital outlays over the past 6 months fell 1 point to 52 percent, still in “maintenance mode”. Nineteen (19) percent reported “poor sales” as their top business problem, down 4 points as reported sales trends improved 5 points, but still remained negative. The percent of owners planning capital outlays in the next 3 to 6 months rose 1 point to 20 percent. Eight percent characterized the current period as a good time to expand facilities (up 2 points), historically a very weak number. Overall, not a good environment for investment spending, but at least owners now know their marginal tax rates and can determine “aftertax returns” with more certainty. INFLATION Sixteen (16) percent of the NFIB owners reported raising their average selling prices in the past 3 months (up 1 point), and 17 percent reported price reductions (unchanged)). Seasonally adjusted, the net percent of owners raising selling prices was 0 percent, unchanged. With sluggish consumer spending, there is little opportunity to raise prices and make it stick. Twenty-two (22) percent plan on raising average prices in the next few months (up 1 point), 3 percent plan reductions (down 1 point). Seasonally adjusted, a net 16 percent plan price hikes, unchanged. It appears that the Federal Reserve’s forecast (hope) for continued low inflation is a reality on Main Street. EARNINGS AND WAGES Reports of positive earnings trends improved 3 points in December, rising to a net negative 29 percent, a dismal reading. Four percent reported reduced worker compensation and 13 percent reported raising compensation, yielding a seasonally adjusted net 13 percent reporting higher worker compensation (up 6 points). A net seasonally adjusted 5 percent plan to raise compensation in the coming months, up 1 point from November. These compensation increases are not being passed on to consumers through higher selling prices, which in part explains the poor profit performance. CREDIT MARKETS Six percent of the owners reported that all their credit needs were not met, unchanged from November. Twenty-nine (29) percent reported all credit needs met, and 52 percent explicitly said they did not want a loan. Only 1 percent reported that financing was their top business problem, tied for the lowest reading in survey history, compared to 23 percent citing taxes, 19 percent citing weak sales and 21 percent citing regulations and red tape. Twenty-nine (29) percent of all owners reported borrowing on a regular basis, down 1 point from November. A net 9 percent reported loans “harder to get” compared to their last attempt (asked of regular borrowers only), unchanged from November. A record low 1 percent of owners reported financing as their top business problem and a net negative 2 percent (seasonally adjusted) reported higher interest rates on their most recent loan. Interest rates are not rising.

2 | NFIB Small Business Economic Trends Monthly Report

COMMENTARY
December was more of the same, uncertainty right up to the last minutes of 2012 and then over the cliff, at least for a few hours. Then something was cobbled together, cans were kicked, taxes went up. What a way to run a business. It’s like the Greek Railroad (ok, the entire Greek government), revenues are far short of labor costs so it borrows money each year to keep operating, building up debt until lenders will no longer pretend to believe that the debt can ever be repaid. Governments have turned into “consols,” no real maturity at which the debt will actually be repaid, just pay the ever increasing cost of servicing the debt until that is so big, they can’t operate any more. The current Index value of 88 is a recession level reading. There isn’t much else to say beyond that. Inventory demand fell, job creation plans weakened, both from levels that were already in the hole. Capital spending remains weak. Seventy percent of the owners characterize the current period as a bad time to expand; one in four of them cite political uncertainty as the top reason. This “uncertainty” is likely to be a headline player for at least the first half of 2013. As the year progresses, those looking for some meaningful progress on the deficit are likely to be disappointed. Spending will not be cut in any substantial way. Many new “taxes” will be imposed. The Federal Reserve will keep financing the deficit, continually expanding its portfolio. Eventually the Federal Reserve will be able to declare victory (unemployment rate at 6.5%) even if its policies are benign or even mildly counterproductive. The private economy will take care of that in spite of all the impediments government puts in its way. But it could be so much better with some intelligent management. There will be a few bright spots; housing will recover, driven by demographic necessity (and some weather). That’s a small business industry. Energy will continue to generate jobs. Creating new wells requires all types of labor. However, once drilled, not much labor is required to keep the gas and oil flowing. But cheap oil and gas will create a demand for retrofitting and attract new business that will need new plant and equipment. Car sales will be solid in 2013 as well. But overall, economic policy will be restrictive. There is no way we can avoid “going over the cliff” in some form or another. Spending must slow and taxes will rise. New income tax rates are now set, but there are many more “hidden” taxes. There will be reductions in spending somewhere, and that’s a reduction in incomes for some workers and firms. Whatever the resolution of the “cliff”, it will not provide a stimulus unless it somehow turns out to be a very sensible bargain which makes consumers and owners more optimistic about the future. Health care costs are rising as well. Minimum wages are rising, impeding job creation. Our trading partners are weaker, reducing export demand. Consumers still have a debt hangover from the party. All this “sludge” on the road will reduce the speed of economic growth.

3 | NFIB Small Business Economic Trends Monthly Report

OVERVIEW - SMALL BUSINESS OPTIMISM
OPTIMISM INDEX
Based on Ten Survey Indicators
(Seasonally Adjusted 1986=100)
110

Index Value (1986=100)

100

90

80

86

88

90

92

94

96

98

00

02

04

06

08

10

12

YEAR

OPTIMISM INDEX
Based on Ten Survey Indicators
(Seasonally Adjusted 1986=100)

Jan 2007 98.9 2008 91.8 2009 84.1 2010 89.3 2011 94.1 2012 93.9

Feb
98.2 92.9 82.6 88.0 94.5 94.3

Mar
97.3 89.6 81.0 86.8 91.9 92.5

Apr May
96.8 91.5 86.8 90.6 91.2 94.5 97.2 89.3 88.9 92.2 90.9 94.4

Jun
96.0 89.2 87.9 89.0 90.8 91.4

Jul Aug Sep
97.6 88.2 86.5 88.1 89.9 91.2 96.3 91.1 88.6 88.8 88.1 92.9 97.3 92.9 88.8 89.0 88.9 92.8

Oct Nov Dec
96.2 87.5 89.1 91.7 90.2 93.1 94.4 87.8 88.3 93.2 92.0 87.5 94.6 85.2 88.0 92.6 93.8 88.0

SMALL BUSINESS OUTLOOK
OUTLOOK
4 | NFIB Small Business Economic Trends Monthly Report

Good Time to Expand and Expected General Business Conditions
January 1986 to December 2012 (Seasonally Adjusted)
30 80 60 20 40 20 10 0 -20 0 86 88 90 92 94 96 98 00 YEAR 02 04 06 08 10 12 -40

Percent "Good Time to Expand" (thick line)

Percent "Better" Minus "Worse" Expected General Business Conditions (thin line)

SMALL BUSINESS OUTLOOK (CONTINUED)
OUTLOOK FOR EXPANSION
Percent Next Three Months “Good Time to Expand”
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
17 9 6 5 8 9

Feb
18 8 3 4 7 8

Mar
12 5 1 2 5 7

Apr
12 6 4 4 4 7

May Jun
12 4 5 5 5 7 13 4 4 6 4 5

Jul
16 6 5 5 6 5

Aug Sep
12 6 5 4 5 4 14 11 9 6 6 7

Oct
14 5 7 7 7 7

Nov Dec
13 7 8 9 8 6 14 7 7 8 10 8

MOST IMPORTANT REASON FOR EXPANSION OUTLOOK
Reason Percent by Expansion Outlook
December 2012

Reason Economic Conditions Sales Prospects Fin. & Interest Rates Cost of Expansion Political Climate Other/Not Available

Good Time
1 2 1 0 0 1

Not Good Time
42 3 1 2 19 3

Uncertain
11 1 0 1 9 2

Net Percent (“Better” Minus “Worse”) Six Months From Now
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
-1 -22 -12 1 10 -3

Feb
-2 -9 -21 -9 9 -6

Mar
-7 -23 -22 -8 -5 -8

Apr May
-8 -12 2 0 -8 -5 -3 -12 12 8 -5 -2

Jun
-5 -19 7 -6 -11 -10

Jul Aug Sep
-1 -17 -3 -15 -15 -8 0 4 10 -8 -26 -2 2 14 8 -3 -22 2

Oct Nov Dec
-2 -4 11 8 -16 2 -10 -2 3 16 -12 -35 -10 -13 2 9 -8 -35

5 | NFIB Small Business Economic Trends Monthly Report

OUTLOOK FOR GENERAL BUSINESS CONDITIONS

SMALL BUSINESS EARNINGS
EARNINGS
Actual Last Three Months
January 1986 to December 2012 (Seasonally Adjusted)
0 -10

Net Percent

-20 -30 -40 -50 86 88 90 92 94 96 98 00 YEAR 02 04 06 08 10 12

ACTUAL EARNINGS CHANGES
Net Percent (“Higher” Minus “Lower”) Last Three Months Compared to Prior Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
-21 -27 -47 -42 -28 -24

Feb
-19 -25 -44 -39 -27 -19

Mar
-15 -33 -46 -43 -32 -23

Apr May
-19 -28 -43 -31 -26 -12 -15 -28 -43 -28 -24 -15

Jun
-18 -33 -42 -32 -24 -22

Jul Aug Sep
-17 -37 -45 -33 -24 -27 -22 -30 -40 -30 -26 -28 -20 -35 -40 -33 -27 -27

Oct Nov Dec
-18 -35 -40 -26 -26 -26 -25 -38 -43 -30 -28 -32 -20 -42 -43 -34 -22 -29

6 | NFIB Small Business Economic Trends Monthly Report

MOST IMPORTANT REASON FOR LOWER EARNINGS
Percent Reason December 2012

Current Month Sales Volume Increased Costs* Cut Selling Prices Usual Seasonal Change Other
17 11 4 4 5

One Year Ago
16 12 2 4 3

Two Years Ago
35 8 3 3 6

* Increased costs include labor, materials, finance, taxes, and regulatory costs.

SMALL BUSINESS SALES
SALES
Actual (Prior Three Months) and Expected (Next Three Months)
January 1986 to December 2012 (Seasonally Adjusted)
50 40 30

Net Percent

20 10 0 -10 -20 -30 -40 86 88 90 92 94 96 98 00 02 04
Expected Actual

06

08

10

12

YEAR

ACTUAL SALES CHANGES
Net Percent (“Higher” Minus “Lower”) Last Three Months Compared to Prior Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
-3 -7 -31 -26 -11 -6

Feb
-1 -8 -28 -26 -11 -7

Mar
0 -11 -34 -25 -12 1

Apr
4 -9 -28 -15 -5 4

May Jun
1 -11 -33 -11 -9 2 -4 -12 -34 -15 -7 -5

Jul
-1 -15 -34 -16 -8 -9

Aug Sep
-4 -10 -27 -16 -9 -13 -4 -11 -26 -17 -10 -13

Oct
-4 -21 -31 -13 -12 -15

Nov Dec
-3 -25 -31 -15 -11 -15 1 -29 -25 -16 -7 -10

Net Percent (“Higher” Minus “Lower”) During Next Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
22 4 -20 3 13 10

Feb
17 0 -29 0 14 12

Mar
14 -3 -31 -3 6 8

Apr
14 -3 -11 6 5 6

May Jun
16 -11 -5 5 3 2 11 -11 -10 -5 0 -3

Jul
14 -9 -11 -4 -2 -4

Aug Sep
13 -6 -5 0 -12 1 14 -2 -6 -3 -6 1

Oct
13 -16 -4 1 -4 3

Nov Dec
8 -14 -2 6 4 -5 6 -18 -1 8 9 -2

7 | NFIB Small Business Economic Trends Monthly Report

SALES EXPECTATIONS

SMALL BUSINESS PRICES
PRICES
Actual Last Three Months and Planned Next Three Months
January 1986 to December 2012 (Seasonally Adjusted)
40 30 20 10 0 -10 -20 -30 86 88 90 92 94 96 98 00 YEAR 02 04
Planned Actual

Net Percent of Firms

06

08

10

12

ACTUAL PRICE CHANGES
Net Percent (“Higher” Minus “Lower”) Compared to Three Months Ago
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
12 8 -15 -18 -4 -1

Feb
13 13 -24 -21 5 1

Mar
15 18 -23 -20 9 6

Apr
18 20 -24 -11 12 8

May Jun
16 23 -22 -15 15 3 19 29 -17 -13 10 3

Jul
19 32 -19 -11 7 8

Aug Sep
13 26 -19 -8 1 9 9 20 -21 -11 6 6

Oct
15 15 -17 -5 -1 5

Nov Dec
14 0 -17 -4 0 0 16 -6 -22 -5 0 0

8 | NFIB Small Business Economic Trends Monthly Report

PRICE PLANS
Net Percent (“Higher” Minus “Lower”) in the Next Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
24 26 2 8 19 17

Feb
23 22 1 10 21 19

Mar
22 29 0 9 24 21

Apr May
24 31 1 13 24 23 23 32 3 14 23 17

Jun
21 36 5 11 15 16

Jul Aug Sep
23 38 5 10 19 17 22 30 8 10 16 17 21 24 6 7 14 19

Oct Nov Dec
22 18 5 12 14 16 26 11 4 13 15 16 26 3 3 15 14 16

SMALL BUSINESS EMPLOYMENT
ACTUAL EMPLOYMENT CHANGES
Net Percent (“Increase” Minus “Decrease”) in the Last Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
2 0 -15 -10 -4 0

Feb
4 -3 -15 -9 -2 -2

Mar
-6 -7 -22 -11 -4 -3

Apr
-5 -9 -25 -12 -6 -4

May Jun
-2 -10 -24 -12 -3 -5 0 -12 -23 -10 -7 -3

Jul
1 -5 -17 -5 -2 1

Aug Sep
4 -4 -16 -2 -2 2 -1 -10 -16 -3 -5 -3

Oct
3 -9 -12 -6 0 1

Nov Dec
0 -10 -12 -2 2 -1 2 -18 -12 -1 1 -2

QUALIFIED APPLICANTS FOR JOB OPENINGS
Percent Few or No Qualified Applicants
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
41 37 * 24 28 31

Feb
41 36 * 26 30 31

Mar
43 36 24 23 29 32

Apr
43 37 24 26 32 34

May Jun
42 33 25 26 30 37 45 39 27 25 33 33

Jul
43 36 26 28 31 38

Aug Sep
44 35 23 32 33 37 48 38 25 30 34 41

Oct
46 35 25 28 31 38

Nov Dec
40 31 28 27 35 36 37 30 21 28 34 33

Planned Next Three Months and Current Job Openings
January 1986 to December 2012 (Seasonally Adjusted)
40 30

Percent

20 10 0 -10 86 88 90 92 94 96
Planned Job Openings

98 YEAR

00

02

04

06

08

10

12

9 | NFIB Small Business Economic Trends Monthly Report

EMPLOYMENT

SMALL BUSINESS EMPLOYMENT (CONTINUED)
JOB OPENINGS
Percent With Positions Not Able to Fill Right Now
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
26 24 11 10 13 18

Feb
25 20 11 11 15 17

Mar
26 19 10 9 15 15

Apr May
26 21 9 11 14 17 24 15 9 9 12 20

Jun
26 21 11 9 15 15

Jul Aug Sep
23 17 9 10 12 15 25 15 8 11 15 18 25 18 8 11 14 17

Oct Nov Dec
22 14 8 10 14 16 19 14 8 9 16 17 21 14 10 13 15 16

HIRING PLANS
Net Percent (“Increase” Minus “Decrease”) in the Next Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
17 9 -6 -1 3 5

Feb
13 11 -3 -1 5 4

Mar
12 3 -10 -2 2 0

Apr May
13 5 -5 -1 2 5 13 2 -5 1 -1 6

Jun
12 5 -1 1 3 3

Jul Aug Sep
13 5 -3 2 2 5 15 9 0 1 5 10 14 7 -4 -3 4 4

Oct Nov Dec
11 0 -1 1 3 4 11 -4 -3 4 7 5 11 -6 -2 6 6 1

10 | NFIB Small Business Economic Trends Monthly Report

SMALL BUSINESS COMPENSATION
COMPENSATION
Actual Last Three Months and Planned Next Three Months
40 35 30 25 20 15 10 5 0 -5

January 1986 to December 2012 (Seasonally Adjusted)

Net Percent

Planned Higher Actual Higher

86

88

90

92

94

96

98

00 YEAR

02

04

06

08

10

12

SMALL BUSINESS COMPENSATION (CONTINUED)
ACTUAL COMPENSATION CHANGES
Net Percent (“Increase” Minus “Decrease”) During Last Three Months
(Seasonally Adjusted)

Jan
2007 2008 2009 2010 2011 2012 26 25 7 1 10 12

Feb
30 23 1 -2 8 14

Mar
28 24 0 0 7 14

Apr May
26 20 0 3 9 14 29 15 0 2 9 16

Jun
26 20 -2 4 8 13

Jul Aug Sep
27 18 1 3 10 12 24 18 1 3 9 13 27 17 3 3 8 14

Oct Nov Dec
26 15 0 4 7 11 21 13 0 8 10 7 24 9 3 8 10 13

COMPENSATION PLANS
Net Percent (“Increase” Minus “Decrease”) in the Next Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
16 12 3 1 5 6

Feb
19 12 3 6 7 12

Mar
19 15 0 3 9 9

Apr
18 14 2 5 7 9

May Jun
16 8 1 4 7 9 15 12 3 3 7 7

Jul
16 12 4 5 6 8

Aug Sep
14 11 3 6 7 10 19 10 3 3 7 10

Oct
16 9 5 5 8 9

Nov Dec
15 10 1 5 9 4 14 4 1 3 5 5

Net Percent Price Increase and Net Percent Compensation
(Seasonally Adjusted)
40 30 20 10 0 -10 -20 -30 86 88 90 92 94 96
Actual Prices Actual Compensation

98

00 YEAR

02

04

06

08

10

12

11 | NFIB Small Business Economic Trends Monthly Report

PRICES AND LABOR COMPENSATION

SMALL BUSINESS CREDIT CONDITIONS
CREDIT CONDITIONS
Loan Availability Compared to Three Months Ago*
January 1986 to December 2012
2 0 -2 -4 -6 -8 -10 -12 -14 -16 -18

Net Percent of Firms

86

88

90

92

94

96

98

00

02

04

06

08

10

12

YEAR
* For the population borrowing at least once every three months.

REGULAR BORROWERS
Percent Borrowing at Least Once Every Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
37 36 35 32 31 32

Feb
39 34 36 34 31 32

Mar
35 33 33 35 29 31

Apr
37 36 33 31 32 32

May Jun
38 35 34 32 29 32 35 35 30 29 29 29

Jul
36 34 33 32 30 31

Aug Sep
35 34 32 31 32 30 36 32 33 33 31 31

Oct
36 33 33 31 30 30

Nov Dec
32 31 33 28 34 30 34 33 33 30 31 29

12 | NFIB Small Business Economic Trends Monthly Report

AVAILABILITY OF LOANS
Net Percent (“Easier” Minus “Harder”) Compared to Three Months Ago
(Regular Borrowers)

Jan 2007 2008 2009 2010 2011 2012
-5 -7 -13 -14 -10 -8

Feb
-5 -5 -13 -12 -11 -8

Mar
-7 -7 -12 -15 -8 -11

Apr May
-5 -9 -14 -14 -9 -7 -6 -8 -16 -13 -10 -9

Jun
-5 -7 -14 -13 -9 -7

Jul Aug Sep
-5 -9 -15 -13 -10 -7 -7 -10 -14 -12 -13 -7 -9 -11 -14 -14 -10 -6

Oct Nov Dec
-6 -9 -14 -11 -11 -7 -7 -11 -15 -11 -10 -9 -7 -12 -15 -12 -8 -9

SMALL BUSINESS CREDIT CONDITIONS (CONTINUED)
BORROWING NEEDS SATISFIED
Percent of All Businesses Last Three Months Satisfied/ Percent of All Businesses Last Three Months Not Satisfied
(All Borrowers)

Jan 2007 36/5 2008 34/5 2009 33/8 2010 27/11 2011 28/8 2012 30/7

Feb
40/5 35/4

Mar
35/5 32/6

Apr
38/4 34/5 30/8 28/9 28/8 31/8

May Jun
39/6 34/7 36/4 35/5

Jul
37/5 32/7 27/9 28/8 30/7

Aug Sep
35/4 35/6 27/9 28/7 31/7 37/5 33/6 27/9 29/8 32/8

Oct
36/6 31/6 26/9 28/9 28/8

Nov Dec
32/4 31/7 25/9 30/7 28/6 32/7 32/6 28/8 28/9 29/7 29/6

32/8 29/10 29/9 29/11 29/8 31/7 28/7 27/8

28/9 30/10 28/10 28/8 25/10 28/8 29/9 25/9 29/7

30/7 30/10

29/9 29/10

EXPECTED CREDIT CONDITIONS
Net Percent (“Easier” Minus “Harder”) During Next Three Months
(Regular Borrowers)

Jan 2007 2008 2009 2010 2011 2012
-7 -9 -14 -13 -10 -9

Feb
-8 -8 -16 -14 -10 -10

Mar
-8 -9 -14 -16 -9 -11

Apr May
-7 -11 -12 -15 -13 -8 -6 -10 -15 -12 -11 -10

Jun
-6 -10 -13 -13 -10 -8

Jul Aug Sep
-6 -12 -14 -14 -11 -7 -9 -11 -13 -14 -13 -9 -10 -13 -15 -14 -12 -7

Oct Nov Dec
-8 -16 -16 -12 -11 -8 -8 -13 -15 -10 -10 -10 -10 -15 -15 -11 -9 -11

Relative Rates and Actual Rates Last Three Months
January 1986 to December 2012
40

Avg. Short-term Rate (thick line)

11 9 7 5

20 0 -20 -40

86

88

90

92

94

96

98

00 YEAR

02

04

06

08

10

12

Rate Relative (thin line)

13

13 | NFIB Small Business Economic Trends Monthly Report

INTEREST RATES

SMALL BUSINESS CREDIT CONDITIONS (CONTINUED)
RELATIVE INTEREST RATE PAID BY REGULAR BORROWERS
Net Percent (“Higher” Minus “Lower”) Compared to Three Months Ago

Jan 2007 2008 2009 2010 2011 2012
17 0 -12 6 3 1

Feb
21 -9 -9 6 6 2

Mar
19 -5 -1 9 5 3

Apr May
16 -12 -2 5 5 0 15 -15 0 4 3 -1

Jun
12 -11 0 0 0 -5

Jul Aug Sep
12 -4 3 2 0 -3 14 -2 3 3 1 -2 15 -3 5 1 1 0

Oct Nov Dec
4 -2 3 1 -2 -1 3 -6 8 0 -1 2 1 -8 3 1 -3 -2

Borrowing at Least Once Every Three Months.

ACTUAL INTEREST RATE PAID ON SHORT-TERM LOANS BY BORROWERS
Average Interest Rate Paid

Jan 2007 2008 2009 2010 2011 2012
9.1 8.3 6.4 6.3 6.0 6.0

Feb
9.3 8.1 6.2 6.0 6.0 5.8

Mar
9.3 8.3 6.2 6.8 5.9 5.7

Apr
9.2 7.7 6.1 6.4 6.5 5.7

May Jun
9.5 6.9 6.3 6.5 6.0 5.5 9.3 7.1 6.5 6.0 6.0 6.3

Jul
9.2 7.0 6.5 6.3 5.9 5.7

Aug Sep
8.7 6.9 6.1 6.3 6.1 5.7 9.0 7.1 6.1 6.2 6.1 5.7

Oct
9.1 6.6 6.0 6.0 6.2 5.8

Nov Dec
8.5 7.0 5.9 5.7 6.3 5.7 8.5 6.6 6.3 6.2 5.9 5.6

14 | NFIB Small Business Economic Trends Monthly Report

SMALL BUSINESS INVENTORIES
INVENTORIES
Actual (Last Three Months) and Planned (Next Three Months)
15 10 5 0 -5 -10 -15 -20 -25 -30 86 88 90 92 94 96 98 00 YEAR 02
Actual Planned

January 1986 to December 2012 (Seasonally Adjusted)

Net Percent

04

06

08

10

12

SMALL BUSINESS INVENTORIES (CONTINUED)
ACTUAL INVENTORY CHANGES
Net Percent (“Increase” Minus “Decrease”) During Last Three Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
1 -4 -18 -21 -10 -7

Feb
5 -2 -19 -18 -8 0

Mar
2 -7 -23 -18 -7 -9

Apr
-2 -10 -27 -18 -9 -8

May Jun
2 -12 -27 -20 -13 -8 -5 -11 -27 -21 -14 -7

Jul
-2 -14 -27 -19 -13 -10

Aug Sep
-3 -13 -24 -15 -9 -7 -2 -12 -24 -14 -11 -8

Oct
-1 -13 -26 -16 -10 -8

Nov Dec
-6 -17 -25 -15 -10 -10 -3 -21 -28 -13 -10 -10

INVENTORY SATISFACTION
Net Percent (“Too Low” Minus “Too Large”) at Present Time
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
-2 -4 -6 -1 0 1

Feb
-2 -4 -5 -1 2 2

Mar
-5 -1 -4 -1 -1 3

Apr
-3 -1 -5 1 1 0

May Jun
-6 -3 -2 0 -1 0 -7 -1 -5 -1 -1 0

Jul
-2 -4 -4 0 0 0

Aug Sep
-2 -3 -4 -1 1 0 -3 -1 0 -2 -1 -1

Oct
-7 -4 -3 1 0 0

Nov Dec
-3 -4 -2 -3 -1 -2 -3 -7 -4 -3 0 0

Net Percent (“Increase” Minus “Decrease”) in the Next Three to Six Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
2 -4 -10 -4 -1 -3

Feb
3 -2 -10 -7 -2 2

Mar
3 -2 -13 -7 1 0

Apr
3 -1 -7 -2 -1 0

May Jun
0 -4 -3 2 -3 2 -3 -5 -6 -3 -3 0

Jul
2 -4 -5 -4 -3 -1

Aug Sep
-4 -9 -7 -7 -5 -1 0 -3 -6 -3 -2 -1

Oct
1 -5 -3 -4 0 -1

Nov Dec
2 -6 -3 0 0 -5 -3 -4 -8 -3 2 -4

15 | NFIB Small Business Economic Trends Monthly Report

INVENTORY PLANS

SMALL BUSINESS CAPITAL OUTLAYS
INVENTORY SATISFACTION AND INVENTORY PLANS
Net Percent (“Too Low” Minus “Too Large”) at Present Time Net Percent Planning to Add Inventories in the Next Three to Six Months
15 10 5

(Seasonally Adjusted)

Percent

0 -5 -10 -15 86 88 90 92 94 96 98 00 YEAR 02
Inventory Plans Inventory Satisfaction

04

06

08

10

12

CAPITAL EXPENDITURES
Actual Last Six Months and Planned Next Three Months
January 1986 to December 2012 (Seasonally Adjusted)
75 65

Percent

55 45 35 25 15 86 88 90 92 94
Actual Planned

96

98

00 YEAR

02

04

06

08

10

12

16 | NFIB Small Business Economic Trends Monthly Report

ACTUAL CAPITAL EXPENDITURES
Percent Making a Capital Expenditure During the Last Six Months

Jan 2007 2008 2009 2010 2011 2012
62 58 51 47 51 55

Feb
61 58 52 47 49 57

Mar
61 57 50 45 51 52

Apr
60 56 46 46 50 54

May Jun
60 54 46 46 50 55 55 52 46 46 50 52

Jul
58 52 46 45 50 54

Aug Sep
58 54 45 44 52 55 60 52 44 45 50 51

Oct
61 54 45 47 52 54

Nov Dec
56 56 44 51 53 53 62 51 44 47 56 52

SMALL BUSINESS CAPITAL OUTLAYS (CONTINUED)
TYPE OF CAPITAL EXPENDITURES MADE
Percent Purchasing or Leasing During Last Six Months

Type Vehicles Equipment Furniture or Fixtures Add. Bldgs. or Land Improved Bldgs. or Land

Current
18 36 11 6 13

One Year Ago
20 42 13 5 13

Two Years Ago
15 30 7 4 11

AMOUNT OF CAPITAL EXPENDITURES MADE
Percent Distribution of Per Firm Expenditures During the Last Six Months

Amount $1 to $999 $1,000 to $4,999 $5,000 to $9,999 $10,000 to $49,999 $50,000 to $99,999 $100,000 + No Answer

Current
3 10 4 15 8 11 1

One Year Ago
4 10 8 17 7 9 1

Two Years Ago
3 8 6 14 6 6 1

Percent Planning a Capital Expenditure During Next Three to Six Months
(Seasonally Adjusted)

Jan 2007 2008 2009 2010 2011 2012
30 25 19 20 22 24

Feb
30 26 18 20 22 23

Mar
33 25 16 19 24 22

Apr
29 26 19 19 21 25

May Jun
29 25 20 20 20 24 28 26 17 19 21 21

Jul
27 21 18 18 20 21

Aug Sep
27 23 16 16 21 24 29 21 18 19 20 21

Oct
27 19 17 18 21 22

Nov Dec
27 21 16 20 24 19 30 17 18 21 24 20

17 | NFIB Small Business Economic Trends Monthly Report

CAPITAL EXPENDITURE PLANS

SINGLE MOST IMPORTANT PROBLEM
SINGLE MOST IMPORTANT PROBLEM
December 2012

Problem Taxes Inflation Poor Sales Fin. & Interest Rates Cost of Labor Govt. Reqs. & Red Tape Comp. From Large Bus. Quality of Labor Cost/Avail. of Insurance Other

Current
23 4 19 1 3 21 8 5 8 8

One Year Ago
21 5 23 4 3 20 8 5 7 4

Survey High
32 41 34 37 9 27 14 24 29 31

Survey Low
8 0 2 1 2 4 4 3 4 1

SELECTED SINGLE MOST IMPORTANT PROBLEM
Inflation, Big Business, Insurance and Regulation
January 1986 to December 2012
40 30 20 10 0
Big Business Inflation Insurance Regulation

Percent of Firms

86

88

90

92

94

96

98

00 YEAR

02

04

06

08

10

12

18 | NFIB Small Business Economic Trends Monthly Report

SELECTED SINGLE MOST IMPORTANT PROBLEM
Taxes, Interest Rates, Sales and Labor Quality
January 1986 to December 2012
40 30 20 10 0
Taxes Interest Rates & Finance Sales Labor Quality

Percent of Firms

86

88

90

92

94

96

98

00 YEAR

02

04

06

08

10

12

SURVEY PROFILE
OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY NFIB
Actual Number of Firms

Jan 2007 1755 2008 1845 2009 2013 2010 2114 2011 2144 2012 2155

Feb
750 700 846 799 774 819

Mar

Apr

May Jun
618 737 814 823 733 681

Jul

Aug Sep
720 812 882 874 926 736

Oct

Nov Dec
719 826 825 807 781 733 670 805 830 804 735 648

737 1703 735 1768 867 1794 948 2176 811 1985 757 1817

589 1613 703 1827 758 1994 804 2029 766 1817 740 1803

674 1614 743 1992 827 2059 849 1910 729 2077 691 2029

NFIB OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY
Industry of Small Business
25 20

Percent

15 10 5 0

Number of Full and Part-Time Employees
35 30 25

Percent

20 15 10 5 0

19 | NFIB Small Business Economic Trends Monthly Report

NFIB OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY

NFIB RESEARCH FOUNDATION SMALL BUSINESS ECONOMIC SURVEY
SMALL BUSINESS SURVEY QUESTIONS PAGE IN REPORT
4 Do you think the next three months will be a good time for small business to expand substantially? Why? . . . . . . . . . . . . . . About the economy in general, do you think that six months from now general business conditions will be better than they are now, about the same, or worse? . . . . . . . . . . . . Were your net earnings or “income” (after taxes) from your business during the last calendar quarter higher, lower, or about the same as they were for the quarter before? . . . . . . . . . . . . If higher or lower, what is the most important reason? . . . . . . . . . . During the last calendar quarter, was your dollar sales volume higher, lower, or about the same as it was for the quarter before? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overall, what do you expect to happen to real volume (number of units) of goods and/or services that you will sell during the next three months? . . . . . . . . . . . . . . . . . . . . . . . . . . . How are your average selling prices compared to three months ago? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In the next three months, do you plan to change the average selling prices of your goods and/or services? . . . . . . . . . . During the last three months, did the total number of employees in your firm increase, decrease, or stay about the same? . . . . . . . . If you have filled or attempted to fill any job openings in the past three months, how many qualified applicants were there for the position(s)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Do you have any job openings that you are not able to fill right now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In the next three months, do you expect to increase or decrease the total number of people working for you? . . . . . . . . . . Over the past three months, did you change the average employee compensation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Do you plan to change average employee compensation during the next three months? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

6 6

7

7

8

8

9

20 | NFIB Small Business Economic Trends Monthly Report

9

10

10

11

11

SMALL BUSINESS SURVEY QUESTIONS

PAGE IN REPORT
12 13 13

Are…loans easier or harder to get than they were three months ago? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . During the last three months, was your firm able to satisfy its borrowing needs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Do you expect to find it easier or harder to obtain your required financing during the next three months? . . . . . . . . . . . . . If you borrow money regularly (at least once every three months) as part of your business activity, how does the rate of interest payable on your most recent loan compare with that paid three months ago? . . . . . . . . . . . . . . . . . . . . . . . . . . . If you borrowed within the last three months for business purposes, and the loan maturity (pay back period) was 1 year or less, what interest rate did you pay? . . . . . . . . . . . . . . . . . . During the last three months, did you increase or decrease your inventories? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . At the present time, do you feel your inventories are too large, about right, or inadequate? . . . . . . . . . . . . . . . . . . . . . . . . . . Looking ahead to the next three months to six months, do you expect, on balance, to add to your inventories, keep them about the same, or decrease them? . . . . . . . . . . . . . . . During the last six months, has your firm made any capital expenditures to improve or purchase equipment, buildings, or land? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If [your firm made any capital expenditures], what was the total cost of all these projects? . . . . . . . . . . . . . . . . . . . . . . . . Looking ahead to the next three to six months, do you expect to make any capital expenditures for plant and/or physical equipment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . What is the single most important problem facing your business today? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Please classify your major business activity, using one of the categories of example below . . . . . . . . . . . . . . . . . . . . . . . . How many employees do you have full and part-time, including yourself? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

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15

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21 | NFIB Small Business Economic Trends Monthly Report

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