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 grew an annualized 1.9 percent in the second quarter of 2008, which was stronger than both of the previous two quarters. (The fourth quarter of 2007 was revised to reflect a decline in real GDP.) Two factors led to the increase in output in the second quarter - higher consumption (up an annualized 1.5 percent), perhaps assisted by economic stimulus checks, and a dramatic increase in real exports (up an annualized 9.2 percent). Meanwhile, residential investment continues to be a drag on economic growth, which was reflected in a 14.8 percent annualized decline in real gross private investment in the quarter. The industrial picture was mixed, with industrial production down and the Institute for Supply Management's (ISM's) manufacturers' purchasing index up. Most significantly, though, the ISM index is now above 50, which is a possible sign of recovery in that sector.
Americans remain pessimistic on the economy, as reflected by both the National Federation of Independent Business's optimism index and the University of Michigan's consumer sentiment survey. The NFIB survey shows a lack of desire by small business owners to hire or invest in their firm. These owners now state that inflation is their top concern, followed by taxes and poor sales.
The unemployment rate in June rose to 5.5 percent, its highest point since July 2004. Moreover, the U.S. economy has lost jobs each month so far in 2008, with 412,000 fewer nonfarm payroll jobs in June 2008 than December 2007. The largest losses have come from the construction and manufacturing sectors, which combined, lost 254,000 net jobs in the second quarter. Bright spots for the quarter include education and health services (+166,000), government (+119,000), natural resources and mining (+17,000), and leisure and hospitality (+10,000). Unincorporated self-employment rose 0.6 percent from March to June 2007; it had fallen earlier in the year.
The Federal Reserve Board of Governors cut its target interest rate in April by 25 basis points. The prime rate is 5 percent, down from 8.25 percent in September 2007. Both short-term and long-term government securities, however, ended the quarter up by about 0.60 percent. The Senior Loan Officers' Survey suggests a slight improvement in small business lending demand; however, one could still characterize loan demand as weak. Venture capital deals were roughly equivalent to last year.
Government statistics show higher overall prices. The producer price index was up nearly an annualized 30 percent for the quarter, reflecting higher costs for raw materials and intermediate goods. These costs, however, have not yet been passed along to the consumer, which suggests that large and small businesses saw their profits squeezed. The consumer price index rose 7.9 percent on an annualized basis over that time, but when energy and food prices were excluded, the “core” inflation rate was up an annualized 2.5 percent. West Texas intermediate crude oil averaged $133.93 per barrel in June, and American consumers have become accustomed to paying $4.00 or more per gallon for gasoline. Wages and salaries rose an annualized 3 percent for the second quarter, outstripping the 1.9 percent rise in benefits. Labor productivity remains strong, with nonfarm business output up an annualized 2.2 percent for the quarter.
The Complete Report (pdf)
Information courtesy of the Small Business Administration.
