Stockmarket rout hammers US small business capex plans, NFIB says
Small business confidence in the US remained near historically-high levels in December, amid signs of strength in hiring and in companies' inventory planning, according to the results of one closely-followed survey.
But some analysts said the stable headline index masked underlying weakness and rising price pressures.
The National Federation of Independent Businesses's small business confidence gauge slipped by just 0.4 points from the month before to reach 104.4 (consensus: 103.5).
To take note of, a sub-index linked to job openings hit a fresh record high and according to the NFIB plans for inventory investment "surged".
However, those positives were offset by a decline in expected real sales growth and expected business conditions.
Reports of higher worker compensation remained near record levels too, NFIB said.
According to the business lobby group: "Critics of the Federal Reserve are popping up everywhere. They say that the Federal Reserve is not paying attention to "what financial markets are telling" us about the economy.
"However, the stock market does not reflect the entire economy. The small business sector represents the other half and it continues its two-year run of record high performance levels, an important consideration."
Be that as it may, Ian Shepherdson at Pantheon Macroeconomics believed a further decline in business optimism was likely in January.
In particular, Shepherdson noted the four point decline seen in the sub-index for companies' capital expenditure plans, which he described as a "big blow", although it remained to be seen if the drop would "stick" or even drop further.
"We had expected a modest dip of one or two points, on the grounds that earnings growth is still strong and credit conditions are still easy, but the uncertainty engendered by the drop in stock prices appears to be seriously unnerving small business owners.
"[...] If sustained, [it] signals a sharp slowing in non-oil business capex by the middle of this year."
So too, Shepherdson was surprised by the one point rise in the proportion of owners increasing their average selling prices to a net 17% - despite the recent fall in gasoline prices, a possible indication that core selling prices were "rising quite strongly".
"If maintained at the December level, the survey will be signalling core CPI inflation rising to 2.6% by late this year, from 2.1% in November. Further increases here would be very unwelcome."