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ECONOMIC TRENDS

William C. Dunkelberg Holly Wade

NFIB

SMALL BUSINESS

2011

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 xpected Credit Conditions Now a Good Time to Expand Earnings Trend Total Change Seasonally Adjusted Level % 2 % % - % % % 1 % -1 % % -2 % Change From Last Month Contribution Index Change * * * * * * * * * *
*

-2 0

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.

NFIB

SMALL BUSINESS

ECONOMIC TRENDS
The 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 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 Optimism Index gained 1.8 points it felt like spring! The numbers have been depressing for so long, any little progress looks good. The new reading is still well below the average (prior to 2008) by 8 huge points and below the comparable level in the recovery that started in 2001 by 14 points. But there was more supportive news in the details. Eight of the 10 Index components were unchanged or improved. The labor market components posted nice gains, expectations for real sales gains turned positive and the outlook for business conditions became a lot less negative. So the improvement, although small, was widespread and the forward looking components posted solid gains. LABOR MARKETS The employment picture brightened. Sixteen percent (seasonally adjusted) reported hard to fill job openings (up 2 points). Over the next three months a seasonally adjusted net 7 percent of owners are planning to create new jobs, a 4 point improvement and the strongest reading in 38 months. Still, in a decent expansion, this indicator should be at double digit levels. CAPITAL SPENDING The frequency of reported capital outlays over the past 6 months rose one point to 53 percent. The record low of 44 percent was reached in August 2010. The percent of owners planning capital outlays in the next 3 to 6 months rose 3 points to 24 percent, the highest reading in 40 months. Better, but 5 to 10 points below readings in a growing economy historically. Money is available, but most owners are not interested in a loan to finance the purchase of equipment they dont need. Eight percent characterized the current period as a good time to expand facilities (seasonally adjusted), up 1 point and only a point below the best reading in the past 38 months. Overall, an improved spending picture but still far short of normal. INVENTORIES AND SALES The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past 3 months gained a point, rising to a net negative 11 percent, more firms with sales trending down than up, but an improvement even if at a lousy level. As 25 percent of the owners indicated, poor sales is their top business problem, apparent in the frequency of reported weaker sales trends. The net percent of owners expecting higher real sales gained 8 points to a net 4 percent of all owners (seasonally adjusted), but still 9 points below Januarys reading. A net negative 10 percent of all owners reported growth in inventories (seasonally adjusted), unchanged, and a signal that many firms still have to reduce their inventories to achieve balance, based on their expectations for sales. For all firms, a net negative 1 percent (down 1 point) reported stocks too low, still a very satisfied reading based on survey history.
This survey was conducted in November 2011. A sample of 3,938 small-business owners/members was drawn. Seven hundred ( ) usable responses were received a response rate of 20 percent.

1 | NFIB Small Business Economic Trends Monthly Report

INFLATION Seasonally adjusted, the net percent raising selling prices was 0 percent, up 1 point. This indicates little pressure on prices overall. Twenty (20) percent plan on raising average prices in the next few months, 4 percent plan reductions. Seasonally adjusted, a net 15 percent plan price hikes, up 1 point. With some evidence that spending has picked up, some of these price hikes might stick. EARNINGS AND WAGES Reports of positive earnings trends were 2 points worse in November at a net negative 28 percent of all owners. Most of the reports on profit trends came in before Black Friday, the day bottom lines are hopefully turning from red to black. The December survey will tell the story on Main Street. Not seasonally adjusted, 14 percent reported profits higher (down 1 point), and 40 percent reported profits falling (unchanged). Corporate profits are strong, lots of money being made overseas but the story is very different on Main Street. Compensation costs are rising but not at a rapid rate. Four percent reported reduced worker compensation and 13 percent reported raising compensation, yielding a seasonally adjusted net 10 percent reporting higher worker compensation, a 3 point increase and matching the highest reading since 2008. However, the readings are historically low. A seasonally adjusted 9 percent plan to raise compensation in the coming months, up 1 point. CREDIT MARKETS Three percent reported financing as their #1 business problem, not an issue compared to weakness in sales or taxes or the cost of regulation. Ninetythree (93) percent reported that all their credit needs were met or that they were not interested in borrowing. Seven percent reported that not all of their credit needs were satisfied. The record low is 4 percent, reached in 2000. Fifty-one (51) percent said they did not want a loan (12 percent did not answer the question, presumably uninterested in borrowing as well). Twenty-five (25) percent of the owners reported that weak sales continued to be their top business problem, so investments in new equipment or new workers are not likely to pay off by generating enough additional earnings to repay the loan required to finance the investment. This is a major cause of the lack of credit demand observed in financial markets. Thirty-four (34) percent of all owners reported borrowing on a regular basis, up 4 points. A net 10 percent reported loans harder to get compared to their last attempt (asked of regular borrowers only), down 1 point. The weak recovery provides little incentive to borrow to support expansion or buy new equipment, even if interest rates are low. Four percent of owners reported higher interest rates on their most recent loan and 4 percent reported getting a lower rate. The average reported rate on short term loans (12 months or less in maturity) was 6.3 percent, basically unchanged since 2008 in spite of the Federal Reserves efforts to lower loan rates for small firms.

2 | NFIB Small Business Economic Trends Monthly Report

COMMENTARY
The economy is slowly righting itself, dealing with a huge excess supply of assets created in the 2003-2007 boom and the associated debt incurred to create those assets and take consumption to a record high share of GDP (the party). The 2000 stock crash left winners with cash and losers with worthless shares of lostmoney.com. We moved on, winners and losers declared. The housing bubble crash left a different set of assets for us to deal with. Declaring, even finding, winners and losers is a mess, not the least due to government trying to determine the outcomes. Not worthless pieces of paper but millions of houses, apartments, condos and less often discussed, retail stores, strip malls, restaurants and the like and a pile of inventory to get rid of. This process is difficult and protracted. In 2007, 845,000 new firms were formed (displacing 804,000 existing firms). This process went into reverse in 2008. More firms terminated, fewer started, fewer new homes were built, inventory went on sale to raise cash and employment was slashed as the now surplus of firms struggled to survive. Many of these sought loans to tide them over, loans that by now would in most instances have gone bad had they been made. The adjustment seems to be about over. Historically high percentages of owners report inventories are in balance, reduced to match anemic consumer spending. However few plan to add to stocks as prospects for improved growth have not been optimistic. Firms have stopped firing workers, employment has adjusted to weaker sales, but hiring new workers remains muted, as sales prospects offer little reason to hire more workers. Most equipment is still working requiring little need to buy new stuff. Still a problem is the number of firms competing for reduced levels of consumer spending, experiencing poor financial performance. There is likely more to come here, more terminations. This will increase sales at the remaining firms and with a boost from modestly improving consumer spending, begin to address the unemployment problem a bit more aggressively. The excess supply of structures will continue to be a drag, but less so.
3 | NFIB Small Business Economic Trends Monthly Report

Improvements in consumer sentiment have been grudging as have the gains in owner optimism, little is happening that would make any of them more confident about the future course of the economy. It will take an election to clear the air and provide more certainty about our direction. The Index is still 2 points below where it was in January, not exactly progress over the year. The bulk of the unemployed were created in the small business sector, some from business failures but more by existing owners reducing employment to cut costs. Firms with fewer than 20 workers employed 20 percent of private sector workforce in 2007 but accounted for a third of the employment decline in the recession. These existing firms will have to re-hire many of the workers they let go to get employment back on track. Hopefully the process is getting underway.

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 YEAR 00 02 04 06 08 10

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

Feb

Mar

Apr May
98.5 97.2 89.3 88.9 92.2 90.9

Jun
96.7 96.0 89.2 87.9 89.0 90.8

Jul Aug Sep


98.1 97.6 88.2 86.5 88.1 89.9 95.9 96.3 91.1 88.6 88.8 88.1

Oct Nov Dec


99.7 94.4 87.8 88.3 93.2 92.1 96.5 94.6 85.2 88.0 92.6

2006 101.1 101.5


98.2 92.9 82.6 88.0 94.5

98.0 100.1 97.3 89.6 81.0 86.8 91.9 96.8 91.5 86.8 90.6 91.2

99.4 100.7 97.3 92.9 88.8 89.0 88.9 96.2 87.5 89.1 91.7 90.2

SMALL BUSINESS OUTLOOK


OUTLOOK
4 | NFIB Small Business Economic Trends Monthly Report

Good Time to Expand and Expected General Business Conditions


January 1986 to November 2011 (Seasonally Adjusted)
30 80 60 20 40 20 10 0 -20 0 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR -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 2006 2007 2008 2009 2010 2011


20 17 9 6 5 8

Feb
20 18 8 3 4 7

Mar
19 12 5 1 2 5

Apr
18 12 6 4 4 4

May Jun
18 12 4 5 5 5 13 13 4 4 6 4

Jul
16 16 6 5 5 6

Aug Sep
13 12 6 5 4 5 18 14 11 9 6 6

Oct
20 14 5 7 7 7

Nov Dec
17 13 7 8 9 8 17 14 7 7 8

MOST IMPORTANT REASON FOR EXPANSION OUTLOOK


Reason Percent by Expansion Outlook
November 2011

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

Good Time
2 1 1 0 0 1

Not Good Time


47 4 1 2 14 3

Uncertain
13 1 0 2 4 1

Net Percent (Better Minus Worse) Six Months From Now


(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


6 -1 -22 -12 1 10

Feb
3 -2 -9 -21 -9 9

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

Apr May
-3 -8 -12 2 0 -8 -10 -3 -12 12 8 -5

Jun
-8 -5 -19 7 -6 -11

Jul Aug Sep


-6 -1 -17 -3 -15 -15 -8 0 4 10 -8 -26 2 2 14 8 -3 -22

Oct Nov Dec


11 -2 -4 11 8 -16 11 -10 -2 3 16 -12 -4 -10 -13 2 9

5 | NFIB Small Business Economic Trends Monthly Report

OUTLOOK FOR GENERAL BUSINESS CONDITIONS

SMALL BUSINESS EARNINGS


EARNINGS
Actual Last Three Months
January 1986 to November 2011 (Seasonally Adjusted)
0 -10

Net Percent

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

ACTUAL EARNINGS CHANGES


Net Percent (Higher Minus Lower) Last Three Months Compared to Prior Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


-16 -21 -27 -47 -42 -28

Feb
-15 -19 -25 -44 -39 -27

Mar
-12 -15 -33 -46 -43 -32

Apr May
-13 -19 -28 -43 -31 -26 -11 -15 -28 -43 -28 -24

Jun
-11 -18 -33 -42 -32 -24

Jul Aug Sep


-16 -17 -37 -45 -33 -24 -19 -22 -30 -40 -30 -26 -8 -20 -35 -40 -33 -27

Oct Nov Dec


-14 -18 -35 -40 -26 -26 -18 -25 -38 -43 -30 -28 -15 -20 -42 -43 -34

6 | NFIB Small Business Economic Trends Monthly Report

MOST IMPORTANT REASON FOR LOWER EARNINGS


Percent Reason November 2011

Current Month Sales Volume Increased Costs* Cut Selling Prices Usual Seasonal Change Other
20 11 3 4 2

One Year Ago


24 10 4 4 1

Two Years Ago


31 8 4 3 5

* 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 November 2011 (Seasonally Adjusted)
50 40 30 20 10 0 -10 -20 -30 -40 86 88 90 92 94 96 98 YEAR 00 02 04 06 08 10
Expected Actual

Net Percent

ACTUAL SALES CHANGES


Net Percent (Higher Minus Lower) Last Three Months Compared to Prior Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


2 -3 -7 -31 -26 -11

Feb
6 -1 -8 -28 -26 -11

Mar
5 0 -11 -34 -25 -12

Apr
6 4 -9 -28 -15 -5

May Jun
11 1 -11 -33 -11 -9 6 -4 -12 -34 -15 -7

Jul
3 -1 -15 -34 -16 -8

Aug Sep
2 -4 -10 -27 -16 -9 5 -4 -11 -26 -17 -10

Oct
2 -4 -21 -31 -13 -12

Nov Dec
0 -3 -25 -31 -15 -11 3 1 -29 -25 -16

Net Percent (Higher Minus Lower) During Next Three Months


(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


24 22 4 -20 3 13

Feb
28 17 0 -29 0 14

Mar
12 14 -3 -31 -3 6

Apr
21 14 -3 -11 6 5

May Jun
20 16 -11 -5 5 3 13 11 -11 -10 -5 0

Jul
18 14 -9 -11 -4 -2

Aug Sep
10 13 -6 -5 0 -12 17 14 -2 -6 -3 -6

Oct
17 13 -16 -4 1 -4

Nov Dec
21 8 -14 -2 6 4 18 6 -18 -1 8

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 November 2011 (Seasonally Adjusted)
40

Net Percent of Firms

30 20 10 0 -10 -20 -30 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR


Planned Actual

ACTUAL PRICE CHANGES


Net Percent (Higher Minus Lower) Compared to Three Months Ago
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


18 12 8 -15 -18 -4

Feb
23 13 13 -24 -21 5

Mar
17 15 18 -23 -20 9

Apr
26 18 20 -24 -11 12

May Jun
24 16 23 -22 -15 15 23 19 29 -17 -13 10

Jul
23 19 32 -19 -11 7

Aug Sep
22 13 26 -19 -8 1 20 9 20 -21 -11 6

Oct
16 15 15 -17 -5 -1

Nov Dec
17 14 0 -17 -4 0 8 16 -6 -22 -5

8 | NFIB Small Business Economic Trends Monthly Report

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

Jan 2006 2007 2008 2009 2010 2011


29 24 26 2 8 19

Feb
27 23 22 1 10 21

Mar
26 22 29 0 9 24

Apr May
28 24 31 1 13 24 30 23 32 3 14 23

Jun
29 21 36 5 11 15

Jul Aug Sep


30 23 38 5 10 19 29 22 30 8 10 16 22 21 24 6 7 14

Oct Nov Dec


21 22 18 5 12 14 22 26 11 4 13 15 26 26 3 3 15

SMALL BUSINESS EMPLOYMENT


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

Jan 2006 2007 2008 2009 2010 2011


1 2 0 -15 -10 -4

Feb
4 4 -3 -15 -9 -2

Mar
-1 -6 -7 -22 -11 -4

Apr
-3 -5 -9 -25 -12 -6

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

Jul
2 1 -5 -17 -5 -2

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

Oct
5 3 -9 -12 -6 0

Nov Dec
0 0 -10 -12 -2 2 3 2 -18 -12 -1

QUALIFIED APPLICANTS FOR JOB OPENINGS


Percent Few or No Qualified Applicants
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


40 41 37 * 24 28

Feb
40 41 36 * 26 30

Mar
39 43 36 24 23 29

Apr
41 43 37 24 26 32

May Jun
46 42 33 25 26 30 45 45 39 27 25 33

Jul
42 43 36 26 28 31

Aug Sep
46 44 35 23 32 33 44 48 38 25 30 34

Oct
46 46 35 25 28 31

Nov Dec
44 40 31 28 27 35 40 37 30 21 28

Planned Next Three Months and Current Job Openings


January 1986 to November 2011 (Seasonally Adjusted)
40 30

20 10 0 -10 86 88 90 92 94 96 98 YEAR 00 02 04 06 08 10
Planned Job Openings

9 | NFIB Small Business Economic Trends Monthly Report

EMPLOYMENT

Percent

SMALL BUSINESS EMPLOYMENT (CONTINUED)


JOB OPENINGS
Percent With Positions Not Able to Fill Right Now
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


26 26 24 11 10 13

Feb
26 25 20 11 11 15

Mar
23 26 19 10 9 15

Apr May
31 26 21 9 11 14 25 24 15 9 9 12

Jun
25 26 21 11 9 15

Jul Aug Sep


24 23 17 9 10 12 25 25 15 8 11 15 25 25 18 8 11 14

Oct Nov Dec


27 22 14 8 10 14 22 19 14 8 9 16 19 21 14 10 13

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

Jan 2006 2007 2008 2009 2010 2011


17 17 9 -6 -1 3

Feb
16 13 11 -3 -1 5

Mar
9 12 3 -10 -2 2

Apr May
16 13 5 -5 -1 2 14 13 2 -5 1 -1

Jun
9 12 5 -1 1 3

Jul Aug Sep


15 13 5 -3 2 2 17 15 9 0 1 5 17 14 7 -4 -3 4

Oct Nov Dec


16 11 0 -1 1 3 19 11 -4 -3 4 7 10 11 -6 -2 6

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 86 88 90 92

January 1986 to November 2011 (Seasonally Adjusted)

Net Percent

Planned Higher Actual Higher

94

96

98

00 YEAR

02

04

06

08

10

SMALL BUSINESS COMPENSATION (CONTINUED)


ACTUAL COMPENSATION CHANGES
Net Percent (Increase Minus Decrease) During Last Three Months
(Seasonally Adjusted)

Jan
2006 2007 2008 2009 2010 2011 25 26 25 7 1 10

Feb
24 30 23 1 -2 8

Mar
22 28 24 0 0 7

Apr May
27 26 20 0 3 9 24 29 15 0 2 9

Jun
22 26 20 -2 4 8

Jul Aug Sep


24 27 18 1 3 10 25 24 18 1 3 9 28 27 17 3 3 8

Oct Nov Dec


23 26 15 0 4 7 25 21 13 0 8 10 21 24 9 3 8

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

Jan 2006 2007 2008 2009 2010 2011


16 16 12 3 1 5

Feb
20 19 12 3 6 7

Mar
16 19 15 0 3 9

Apr
19 18 14 2 5 7

May Jun
15 16 8 1 4 7 14 15 12 3 3 7

Jul
17 16 12 4 5 6

Aug Sep
16 14 11 3 6 7 16 19 10 3 3 7

Oct
18 16 9 5 5 8

Nov Dec
20 15 10 1 5 9 17 14 4 1 3

Net Percent Price Increase and Net Percent Compensation


(Seasonally Adjusted)
40 30 20 10 0 -10 -20 -30 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR
Actual Prices Actual Compensation

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 November 2011
2 0 -2 -4 -6 -8 -10 -12 -14 -16 -18 86 88 90 92 94 96 98 YEAR
* For the population borrowing at least once every three months.

Net Percent of Firms

00

02

04

06

08

10

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

Jan 2006 2007 2008 2009 2010 2011


37 37 36 35 32 31

Feb
38 39 34 36 34 31

Mar
36 35 33 33 35 29

Apr
40 37 36 33 31 32

May Jun
38 38 35 34 32 29 41 35 35 30 29 29

Jul
38 36 34 33 32 30

Aug Sep
46 35 34 32 31 32 35 36 32 33 33 31

Oct
37 36 33 33 31 30

Nov Dec
38 32 31 33 28 34 35 34 33 33 30

12 | NFIB Small Business Economic Trends Monthly Report

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

Jan 2006 2007 2008 2009 2010 2011


-5 -5 -7 -13 -14 -10

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

Mar
-6 -7 -7 -12 -15 -8

Apr May
-4 -5 -9 -14 -14 -9 -5 -6 -8 -16 -13 -10

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

Jul Aug Sep


-6 -5 -9 -15 -13 -10 -8 -7 -10 -14 -12 -13 -3 -9 -11 -14 -14 -10

Oct Nov Dec


-6 -6 -9 -14 -11 -11 -6 -7 -11 -15 -11 -10 -6 -7 -12 -15 -12

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 2006 36/4 2007 36/5 2008 34/5 2009 33/8 2010 27/11 2011 28/8

Feb
37/6 40/5 35/4

Mar
36/6 35/5 32/6

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

May Jun
38/5 39/6 34/7 39/5 36/4 35/5

Jul
38/4 37/5 32/7

Aug Sep
44/4 35/4 35/6 34/4 37/5 33/6

Oct
36/7 36/6 31/6

Nov Dec
34/4 32/4 31/7 36/5 32/7 32/6 28/8 28/9

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

28/9 30/10 28/10 28/8 25/10 28/8 25/9 27/9 28/8

30/7 30/10 27/9 28/7 27/9 29/8

29/9 29/10 26/9 28/9 25/9 30/7

EXPECTED CREDIT CONDITIONS


Net Percent (Easier Minus Harder) During Next Three Months
(Regular Borrowers)

Jan 2006 2007 2008 2009 2010 2011


-6 -7 -9 -14 -13 -10

Feb
-7 -8 -8 -16 -14 -10

Mar
-7 -8 -9 -14 -16 -9

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

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

Jul Aug Sep


-7 -6 -12 -14 -14 -11 -9 -9 -11 -13 -14 -13 -5 -10 -13 -15 -14 -12

Oct Nov Dec


-6 -8 -16 -16 -12 -11 -5 -8 -13 -15 -10 -10 -7 -10 -15 -15 -11

Relative Rates and Actual Rates Last Three Months


January 1986 to November 2011
40 13

20 11 9 7 5 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR 0

-20

-40

13 | NFIB Small Business Economic Trends Monthly Report

INTEREST RATES

Avg. Short-term Rate (thick line)

Rate Relative (thin line)

SMALL BUSINESS CREDIT CONDITIONS (CONTINUED)


RELATIVE INTEREST RATE PAID BY REGULAR BORROWERS
Net Percent (Higher Minus Lower) Compared to Three Months Ago

Jan 2006 2007 2008 2009 2010 2011


26 17 0 -12 6 3

Feb
32 21 -9 -9 6 6

Mar
29 19 -5 -1 9 5

Apr May
32 16 -12 -2 5 5 28 15 -15 0 4 3

Jun
30 12 -11 0 0 0

Jul Aug Sep


30 12 -4 3 2 0 34 14 -2 3 3 1 22 15 -3 5 1 1

Oct Nov Dec


20 4 -2 3 1 -2 23 3 -6 8 0 -1 16 1 -8 3 1

Borrowing at Least Once Every Three Months.

ACTUAL INTEREST RATE PAID ON SHORT-TERM LOANS BY BORROWERS


Average Interest Rate Paid

Jan 2006 2007 2008 2009 2010 2011


8.1 9.1 8.3 6.4 6.3 6.0

Feb
8.3 9.3 8.1 6.2 6.0 6.0

Mar
8.0 9.3 8.3 6.2 6.8 5.9

Apr
8.7 9.2 7.7 6.1 6.4 6.5

May Jun
8.1 9.5 6.9 6.3 6.5 6.0 8.7 9.3 7.1 6.5 6.0 6.0

Jul
9.1 9.2 7.0 6.5 6.3 5.9

Aug Sep
9.0 8.7 6.9 6.1 6.3 6.1 8.8 9.0 7.1 6.1 6.2 6.1

Oct
8.8 9.1 6.6 6.0 6.0 6.2

Nov Dec
8.3 8.5 7.0 5.9 5.7 6.3 9.8 8.5 6.6 6.3 6.2

14 | NFIB Small Business Economic Trends Monthly Report

SMALL BUSINESS INVENTORIES


INVENTORIES
Actual (Last Three Months) and Planned (Next Three Months)
January 1986 to November 2011 (Seasonally Adjusted)
15 10 5 0

Net Percent

-5 -10 -15 -20 -25 -30 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR


Actual Planned

SMALL BUSINESS INVENTORIES (CONTINUED)


ACTUAL INVENTORY CHANGES
Net Percent (Increase Minus Decrease) During Last Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


3 1 -4 -18 -21 -10

Feb
1 5 -2 -19 -18 -8

Mar
6 2 -7 -23 -18 -7

Apr
0 -2 -10 -27 -18 -9

May Jun
-2 2 -12 -27 -20 -13 0 -5 -11 -27 -21 -14

Jul
0 -2 -14 -27 -19 -13

Aug Sep
3 -3 -13 -24 -15 -9 1 -2 -12 -24 -14 -11

Oct
0 -1 -13 -26 -16 -10

Nov Dec
0 -6 -17 -25 -15 -10 -3 -3 -21 -28 -13

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

Jan 2006 2007 2008 2009 2010 2011


-1 -2 -4 -6 -1 0

Feb
-2 -2 -4 -5 -1 2

Mar
0 -5 -1 -4 -1 -1

Apr
-1 -3 -1 -5 1 1

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

Jul
-2 -2 -4 -4 0 0

Aug Sep
-6 -2 -3 -4 -1 1 -6 -3 -1 0 -2 -1

Oct
-3 -7 -4 -3 1 0

Nov Dec
-6 -3 -4 -2 -3 -1 -7 -3 -7 -4 -3

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

Jan 2006 2007 2008 2009 2010 2011


5 2 -4 -10 -4 -1

Feb
7 3 -2 -10 -7 -2

Mar
3 3 -2 -13 -7 1

Apr
2 3 -1 -7 -2 -1

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

Jul
1 2 -4 -5 -4 -3

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

Oct
4 1 -5 -3 -4 0

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

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 04 06 08 10


Inventory Plans Inventory Satisfaction

CAPITAL EXPENDITURES
Actual Last Six Months and Planned Next Three Months
January 1986 to November 2011 (Seasonally Adjusted)
75 65
Actual Planned

Percent

55 45 35 25 15 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

16 | NFIB Small Business Economic Trends Monthly Report

ACTUAL CAPITAL EXPENDITURES


Percent Making a Capital Expenditure During the Last Six Months

Jan 2006 2007 2008 2009 2010 2011


62 62 58 51 47 51

Feb
63 61 58 52 47 49

Mar
62 61 57 50 45 51

Apr
62 60 56 46 46 50

May Jun
62 60 54 46 46 50 60 55 52 46 46 50

Jul
61 58 52 46 45 50

Aug Sep
62 58 54 45 44 52 63 60 52 44 45 50

Oct
62 61 54 45 47 52

Nov Dec
63 56 56 44 51 53 61 62 51 44 47

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 10 7 15

One Year Ago


19 35 12 4 12

Two Years Ago


15 30 8 3 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
5 8 7 18 7 8 0

One Year Ago


5 8 4 18 6 8 2

Two Years Ago


4 9 10 14 4 5 2

Percent Planning a Capital Expenditure During Next Three to Six Months


(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011


32 30 25 19 20 22

Feb
35 30 26 18 20 22

Mar
31 33 25 16 19 24

Apr
33 29 26 19 19 21

May Jun
28 29 25 20 20 20 27 28 26 17 19 21

Jul
31 27 21 18 18 20

Aug Sep
28 27 23 16 16 21 30 29 21 18 19 20

Oct
31 27 19 17 18 21

Nov Dec
31 27 21 16 20 24 26 30 17 18 21

17 | NFIB Small Business Economic Trends Monthly Report

CAPITAL EXPENDITURE PLANS

SINGLE MOST IMPORTANT PROBLEM


SINGLE MOST IMPORTANT PROBLEM
November 2011

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
19 6 25 3 4 19 7 5 8 4

One Year Ago


22 4 30 4 3 15 7 4 8 3

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 November 2011
40
Big Business Inflation Insurance Regulation

Percent of Firms

30

20

10

0 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR
18 | NFIB Small Business Economic Trends Monthly Report

SELECTED SINGLE MOST IMPORTANT PROBLEM


Taxes, Interest Rates, Sales and Labor Quality
January 1986 to November 2011
40
Taxes Interest Rates & Finance Sales Labor Quality

Percent of Firms

30

20

10

0 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

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

Jan 2006 1274 2007 1755 2008 1845 2009 2013 2010 2114 2011 2144

Feb
484 750 700 846 799 774

Mar

Apr

May Jun
440 618 737 814 823 733

Jul

Aug Sep
480 720 812 882 874 926

Oct

Nov Dec
451 719 826 825 807 781 446 670 805 830 804

471 1094 737 1703 735 1768 867 1794 948 2176 811 1985

416 1007 589 1613 703 1827 758 1994 804 2029 766 1817

380 1075 674 1614 743 1992 827 2059 849 1910 729 2077

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


30 25 20

15 10 5 0

19 | NFIB Small Business Economic Trends Monthly Report

NFIB OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY

Percent

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?. . . . . . . . . . . . . . . . . . . . . . . .

6 6

20 | NFIB Small Business Economic Trends Monthly Report

10

10

11

11

SMALL BUSINESS SURVEY QUESTIONS

PAGE IN REPORT

Areloans easier or harder to get than they were three months ago? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .12 During the last three months, was your firm able to satisfy its borrowing needs?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Do you expect to find it easier or harder to obtain your required financing during the next three months?. . . . . .. . . . . . . . . . . . . . . . .13 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?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 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? . . . . . . . . . . .. . . . . . . . . . .. . . . .14 During the last three months, did you increase or decrease your inventories?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .15 At the present time, do you feel your inventories are too large, about right, or inadequate?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 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? . . . . . . . . . . . . . . . . . . . . . . . .15 During the last six months, has your firm made any capital expenditures to improve or purchase equipment, buildings, or land? . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
21 | NFIB Small Business Economic Trends Monthly Report

If [your firm made any capital expenditures], what was the total cost of all these projects? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Looking ahead to the next three to six months, do you expect to make any capital expenditures for plant and/or physical equipment? . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .17 What is the single most important problem facing your business today? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Please classify your major business activity, using one of the categories of example below.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 How many employees do you have full and part-time, including yourself? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19