More evidence emerges as to how badly the “Trump Shutdown” affected American consumers and small business. The continuing concerns over trade tariffs, potential interest rate hikes, taxes, deregulation, unstable corporate earnings, and ever changing geopolitical winds are especially frustrating for small business planning.
Whether to hire additional employees, make capital investments, raise prices, or boost wages are all the normal components of running a small business. Bottom line is a major monkey wrench was thrust at all small business owners during the abnormal period of 2016-2020.
Consumers face similar uncertainties as whether to spend more, take on more debt, refinance, buy a home, sell or buy investments, etc.
The Conference Board Consumer Confidence Index increased in February, following a decline in January. The Index now stands at 131.4, up from 121.7 in January. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – improved, from 170.2 to 173.5. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – increased from 89.4 last month to 103.4 this month.
The real proof of consumer confidence will come with the release of the first quarter credit/debit card purchase dollar volume figures for the U.S.
Nevertheless, the common thread for consumers, big businesses, small businesses, Main Street and Wall Street is UNCERTAINTY.
The NFIB Small Business Optimism Index improved modestly in February, increasing 0.5 points to 101.7.
The NFIB concurs earnings trends weakened, as a million laid off workers and others affected by the shutdown cut back on spending. The loss of sales falls right to the bottom line. Worker compensation and selling prices were lower in February than they were in January, but job openings rebounded remaining at historically high levels. The Uncertainty Index fell 1 point to 85, a small decline but still showing a lot of residual uncertainty from the government shutdown.
However, the NFIB report found job creation among small businesses broke the 45-year record in February with a net addition of 0.52 workers per firm. The previous record was in May 1998 at 0.51 workers per firm. The percent of owners citing labor costs as their most important problem also hit an all-time high, with 10% of owners reporting labor costs as their biggest problem.
The NFIB’s latest monthly report, released this week, also found net negative 1% of all owners reported higher nominal sales in the past three months, a 5 point decline. Fifty-eight percent reported capital outlays, down 2 points. The net percent of owners raising average selling prices fell 2 points to a net 13%. Reports of higher worker compensation fell 5 points to a net 31% of all firms.
Three percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically very low.
JPMorgan’s 2019 Business Leaders Outlook report opines the current economic expansion stretches to a full decade and companies feel the benefits provided by last year’s corporate tax cut, the majority of firms have a firmly positive outlook for their own businesses and the US economy in 2019.
However, trade policy worries, coupled with softer economic trends outside the US, appear to be causing a decidedly more subdued international outlook. Only 39% of middle market executives feel optimistic about the global economy over the next year, which is significantly lower than the portion of respondents who feel optimistic toward the national (73%) and local (70%) economies.
As businesses look to expand, international trade policy is joined by the limited supply of talent and disruptive technologies as potential obstacles to overcome on their path to growth in 2019.