The Quarterly Indicators report provides recent monthly and quarterly data from a wide variety of sources relevant to small businesses. Economic activity of small firms is examined at the national level.
Trends
In the third quarter of 2005, Americans dealt with the ramifications of Hurricanes Katrina and Rita and rising petroleum prices; nonetheless, the economy continued its expansion. Real gross domestic product (GDP) grew at an annualized rate of 3.8 percent, up from 3.3 percent the previous quarter. Personal and business spending accounted for this result as real personal consumption and real gross private fixed investment increased at annualized rates of 3.9 and 2.2 percent, respectively. Nonfarm productivity increased a healthy annualized 4.1 percent in the third quarter, up from 2.1 percent in the second quarter. Meanwhile, exports, imports, and proprietors' income remained relatively flat. Industrial production declined, due in large part to the storms.
Measures of optimism were mixed, especially after the hurricanes. The National Federation of Independent Business' monthly Optimism Index fell slightly, to 100.0, but this level still indicates that the small business sector is growing. The same survey found that a large percentage of small businesses respondents consider the next three months "a good time to expand." This contrasts with the University of Michigan's Consumer Sentiment Survey, which fell from 96.5 in July to 76.9 in September. Despite the increased pessimism, consumption spending is still strong.
The unemployment rate fell to 4.9 percent in August but rose to 5.1 percent in September after the hurricanes. The economy has created nearly 1.6 million net new jobs so far this year, with 453,000 of those stemming from the third quarter. Employment rose in most major industries with the exception of leisure and hospitality, manufacturing, retail trade, and other services. The national perspective, however, masks the employment losses that have resulted from Hurricanes Katrina and Rita in the affected areas. Between August and September, Louisiana lost 251,000 individuals from its nonfarm payroll and Mississippi lost 59,700.
The Federal Reserve has continued to raise interest rates in an effort to stabilize the growing economy. Higher rates, though, have not dampened demand for small business lending, which according to the Senior Loan Officers' Survey, remains strong.
The price of West Texas crude reached an average of $65.57 for the month of September, resulting in significantly higher prices for gasoline attributable to hurricane-related damage as well as continued increases in global demand. Consumer prices (excluding energy costs) have remained under control, rising at an annualized growth rate of 1.6 percent for the third quarter.
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Information courtesy of the Small Business Administration.
