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 American economy moderated its growth in the second quarter of 2006, growing 2.5 percent, down from 5.6 percent in the first quarter. Slower growth in real gross domestic product (GDP) mirrored similar slow-downs in real personal consumption and real gross private fixed investment. Real exports grew faster than real imports, though both figures were lower than in the first quarter. The second quarter of 2006 was the 19th consecutive quarter of real GDP growth, and industrial output continued to rise. In addition, the Institute for Supply Management's Purchasing Management Index has had a reading above 50 (which signifies growth in the sector) in every month since June 2003 - for 38 consecutive months.
Overall business and consumer confidence has fallen, according to the National Federation of Independent Business (NFIB) Optimism Index and the University of Michigan's Consumer Sentiment Survey. In June, the NFIB survey stated that fewer small businesses considered the next three months a good time to expand or to hire new workers relative to previous months.
The unemployment rate in May and June 2006 was 4.6 percent, the lowest rate in five years. There were 865,000 nonfarm payroll jobs added in the first half of 2006, with 336,000 stemming from the second quarter. This net job growth is less than the pace set during the previous two years (first half). All major industries, except for the retail trade and information sectors, experienced employment gains in the second quarter. Industries with the largest shares of small business employment—construction, other services, wholesale trade, and leisure and hospitality—added 89,700 net new jobs during the quarter. Unincorporated self-employment increased to 10.7 million; incorporated self-employment remained at 5.5 million. Employee wages and salaries increased at a similar rate as employee benefits.
Interest rates continued to rise, with the prime rate averaging 7.9 percent in the second quarter of 2006, up a half percent from the first quarter. Other interest rates rose similarly, and the result has been slower growth in small business lending now versus one year ago, according to the Senior Loan Officers' Survey. Venture capital investment remains steady.
Core consumer inflation, which excludes energy costs, increased an annualized 3.4 percent during the quarter. With the price of West Texas crude averaging $70.96 per barrel in June 2006, up $8.06 from March 2006, the annualized increase in the consumer price index including energy costs was up 5.1 percent for the quarter. Each suggests that inflationary pressures in the economy have returned after a long absence. According to the University of Michigan survey, consumers expect inflation to increase at 3.3 percent over the next twelve months, comparable with their expectations in 2005.
The Complete Report (pdf)
Information courtesy of the Small Business Administration.
