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
The U.S. economy began 2006 with a strong showing: real gross domestic product (GDP) rose at an annual rate of 4.8 percent, up from 1.7 percent in the fourth quarter of 2005. The strong increase reflected healthy growth in the annual rates of real personal consumption expenditures (5.5 percent) and real gross private fixed investment (6.5 percent). A large increase in real exports (12.1 percent annual growth) was outpaced by the expansion of real imports (13.0 percent annual growth). In addition, both industrial production and proprietors' income continued to rise.
Consumers and business owners became slightly more pessimistic as the first quarter of 2006 ended. This was evident in the University of Michigan's Consumer Confidence Survey, which fell to 88.9 in March 2006 from 91.5 in December 2005, as well as in the National Federation of Independent Business's Optimism Index, which fell to a three-year low of 98.0 in March. Small businesses surveyed for the index expressed less willingness to hire in the coming months. The optimism index had been higher in January and February (101.1 and 101.5, respectively), so future surveys will show whether the March reading was an aberration.
The unemployment rate in March 2006 was 4.7 percent, the same as in January 2006 and the lowest rate since July 2001. An additional nonfarm payroll jobs were added, and all major industries except for manufacturing saw net employment increases in the first quarter. Industries with the largest shares of small business employment—construction, other services, wholesale trade, and leisure and hospitality—added 241,500 net new jobs during the quarter. There were also increases in self-employment, with 5.5 million incorporated and 10.6 million unincorporated self-employed in March 2006.
Interest rates continued to rise, with the prime rate averaging 7.4 percent in the first quarter of 2006, up 2 percentage points from the first quarter of 2005. Other interest rates are similar. According to the Senior Loan Officers' Survey, these rate increases have had an impact on the demand for loans to small businesses; bank executives note that the strong demand for such loans has softened from the previous quarter. Venture capital investment remains steady: 761 deals valued at $5.6 billion were finalized in the first three months of 2006.
Core consumer inflation, which excludes energy costs, increased an annual 2.6 percent during the quarter. With energy costs, the consumer price index rose an annual 4.3 percent. The price of West Texas crude averaged $62.90 in March 2006. This is more than in December 2005 ($59.43) but slightly less than the January 2006 price ($65.51), reflecting a volatile energy market.
The Complete Report (pdf)
Information courtesy of the Small Business Administration.
