National Federation of Independent Business (NFIB) Small Business
Optimism Index
APPLICABLE TIME FRAME(S):
LONG
UPDATE SCHEDULE:
Monthly
REPORTING DELAYS:
None
EXPLANATION:
The National Federation of Independent
Business is the leading small business association representing
small and independent businesses. A nonprofit, nonpartisan
organization founded in 1943, NFIB represents the consensus views of
its members in Washington and all 50 state capitals.
NFIB's mission is to promote and protect the right of our members to
own, operate and grow their businesses.
The NFIB polls its members on several areas related to their businesses, such as:
LABOR MARKETS
CAPITAL SPENDING
INVENTORIES AND SALES
INFLATION
PROFITS AND WAGES
CREDIT MARKETS
When the Index of Small Business Optimism is above 100, it indicates an expansionary mode for small business GDP.
GUIDELINES:
Like most other sentiment surveys, this is a coincident indicator. When times are good, consumers are happy; when times are bad, they are less optimistic. The keys to watch for as investors are for those times when divergences occur between sentiment and the stock market, and more especially times of extreme confidence or pessimism.
At the extremes, the survey is a decent contrary indicator. When the survey has recorded readings in excess of 103, it has coincided with times of economic expansion and good stock market performance. Generally, stocks under-perform after such occurrences.
When the survey has recorded readings under 95, it has coincided with difficult market conditions. However, by the time it is recognized and extrapolated by consumers, we're usually nearing the trough and the stock market tends to bottom not long after.
ADDITIONAL RESOURCES:
National Federation of Independent Business (www.nfib.com)
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