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 was weaker in the fourth quarter of 2007, with real GDP ending the year at a 0.6 percent annualized growth rate. The weaker dollar helped boost real exports, which increased at an annualized 3.9 percent, while real imports were constant. Consumer spending increased by an annualized 2.0 percent. Investment remained weak, particularly in the residential sector where the nation has seen steady declines. In December 2007, new housing starts averaged an annualized 1.0 million homes - less than half the average level seen in 2005. The Institute for Supply Management's manufacturing composite index fell below 50 in December - the lowest reading since April 2003 - suggesting that manufacturing output was contracting.
The public remained somewhat pessimistic in the fourth quarter according to both the National Federation of Independent Business's optimism index and the University of Michigan's consumer sentiment survey.
Unemployment rose to 5.0 percent in December 2007, its highest level since April 2005. It was low by historical standards, however. The economy generated 282,000 net new jobs in the fourth quarter, and 1.1 million during the entire year. The goods-producing sectors of construction and manufacturing saw declines. Nearly all of the net job gains in 2007 stemmed from service industries: trade, transportation, and utilities; professional and business services; education and health services; leisure and hospitality; and government. Unincorporated self-employment fell in the fourth quarter, and incorporated self-employment remained essentially unchanged. Nonfarm labor productivity grew slower in the fourth quarter than in the previous two quarters.
The Federal Reserve Board lowered its target federal funds rate twice in the fourth quarter of 2007. As a result, the prime rate, which began the quarter at 7.75 percent, ended it at 7.25 percent. (Editor's note: As of today, the rate has fallen further - courtesy of additional cuts by the Federal Reserve in the first quarter of 2008 - and now stands at 6.0 percent.) The Federal Reserve's Senior Loan Officers' Survey suggests sustained weakness in the demand for small loans, with some tightening of lending standards. Two other indicators - the total amount of venture capital deals and the total amount invested - both fell in the fourth quarter of 2007, but they were higher than in the fourth quarter of 2006.
Inflationary pressures persisted, as the country saw large gains in consumer prices. When examining core inflation, which excludes food and energy prices, inflation appeared more modest - growing at an annualized 2.7 percent in the fourth quarter. The price of oil, which surpassed $100 per barrel at one point in December, averaged $91.37 for the month, up $11.44 for the quarter and nearly $30 for the year. Employee benefit costs outstripped gains in employee wages and salaries.
The Complete Report (pdf)
Information courtesy of the Small Business Administration.
