ECONOMIC TRENDS

William C. Dunkelberg Holly Wade

NFIB

SMALL BUSINESS

November 2011

Based on a Survey of Small and Independent Business Owners

SMALL BUSINESS OPTIMISM INDEX COMPONENTS

Index Component Plans to Increase Employment Plans to Make Capital Outlays Plans to Increase Inventories Expect Economy to Improve Expect Real Sales Higher Current Inventory Current Job Openings xpected Credit Conditions Now a Good Time to Expand Earnings Trend Total Change Seasonally Adjusted Level 3% 21% 0% -16% -4% 0% 14% -11% 7% -26% Change From Last Month -1 1 2 6 2 1 0 1 1 1 9 Contribution Index Change * * * * * * * * * *
*

Column 1 is the current reading; column 2 is the change from the prior month; column 3 the percent of the total change accounted for by each component; * is under 1 percent and not a meaningful calculation.

ECONOMIC TRENDS
The NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since 1986. The sample is drawn from the membership files of the National Federation of Independent Business (NFIB). Each was mailed a questionnaire and one reminder. Subscriptions for twelve monthly SBET issues are $250. Historical and unadjusted data are available, along with a copy of the questionnaire, from the NFIB Research Foundation. You may reproduce Small Business Economic Trends items if you cite the publication name and date and note it is a copyright of the NFIB Research Foundation. NFIB Research Foundation. ISBS #0940791-24-2. Chief Economist William C. Dunkelberg and Policy Analyst Holly Wade are responsible for the report.

NFIB

SMALL BUSINESS

IN THIS ISSUE
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Commentary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Optimism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 10 Credit Conditions . . . . . . . . . . . . . . . . . . . . . . . 12 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Capital Outlays. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Most Important Problem . . . . . . . . . . . . . . . . 18 Survey Pro le . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Economic Survey . . . . . . . . . . . . . . . . . . . . . . . . 20

SUMMARY
OPTIMISM INDEX The Index of Small Business Optimism gained 1.3 points, nudging the Optimism Index up to 90.2, below the year-to-date average of 91.1 and only slightly better than the average since January 2009 of 89.1. As was the case in September, the gain in the Index was primarily a result of less negative views about the prospects for real sales and business conditions. Hardly the basis for strong economic growth. LABOR MARKETS NFIB owners reported an overall reduction in employment for the 5th month in a row posting an average reduction of 0.1 workers per firm in the October survey. Seasonally adjusted, 12 percent of the owners added an average of 3.1 workers per firm over the past few months, but 11 percent reduced employment an average of 3.9 workers per firm, better than September but not good enough to address the unemployment problem. Fourteen (14) percent (seasonally adjusted) reported hard to fill job openings (unchanged). Over the next three months, 9 percent plan to increase employment (down 2 points), and 12 percent plan to reduce their workforce (unchanged), yielding a seasonally adjusted net 3 percent of owners planning to create new jobs, down 1 point from September and 2 points below August. In a decent expansion, this should exhibit double digit readings CAPITAL SPENDING The frequency of reported capital outlays over the past 6 months rose 2 points to 52 percent. The record low of 44 percent was reached in August 2010. Of those making expenditures, 36 percent reported spending on new equipment (up 1 point), 18 percent acquired vehicles (up 1 point), and 13 percent improved or expanded facilities (unchanged). Five percent acquired new buildings or land for expansion (down 1 point) and 11 percent spent money for new fixtures and furniture (up 2 points). These numbers have not changed all year, range bound around current levels. The percent of owners planning capital outlays in the next 3 to 6 months rose 1 point to 21 percent, a recession level reading that has typified the recovery to date. Money is available, but most owners are not interested in a loan to finance the purchase of equipment they dont need. Seven percent characterized the current period as a good time to expand facilities (seasonally adjusted), up 1 point but still lower than Januarys reading. The net percent of owners expecting better business conditions in 6 months was a negative 16 percent, 6 points better than September, but still 26 percentage points lower than January. A net negative 4 percent of all owners expect improved real sales volumes, 26 percent report poor sales as their top business problem. Clearly not an environment for making investment bets on economic growth.
This survey was conducted in October 2011. A sample of 10,799 small-business owners/members was drawn. Two thousand seventy (2077) usable responses were received a response rate of 189percent.

1 | NFIB Small Business Economic Trends Quarterly Report

SUMMARY
INVENTORIES AND SALES The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past 3 months lost 2 points, falling to a net negative 12 percent, more firms with sales trending down than up. Twenty-six (26) percent of the owners indicated poor sales as their top business problem, not surprising with the frequency of reported weaker sales trends. This is not a level of economic activity that will support job creation. The net percent of owners expecting higher real sales gained 2 points to a net negative 4 percent of all owners (seasonally adjusted), 17 points below Januarys reading. This is bad news for hiring and inventory investment. A net negative 10 percent of all owners reported growth in inventories (seasonally adjusted), 1 points better than the September reading. Current sales (which are weak) are often being met by reducing stocks, not by ordering new inventory. For all firms, a net 0 percent (up 1 point) reported stocks too low, still a satisfied reading based on survey history. Stocks are not excessive, but with pessimistic sales expectations, no need to order more. Plans to add to inventories gained 2 points, but to a net 0 percent of all firms (seasonally adjusted), no stimulus from inventory investment, consistent with weak sales expectations and a sour outlook for future business conditions. INFLATION Seasonally adjusted, the net percent raising selling prices was negative 1 percent, down 7 points from September. The continued weakness in sales trends has blunted small businesss ability to raise prices after two years of price cutting to liquidate excess inventories. Eighteen (18) percent plan on raising average prices in the next 3 months, 5 percent plan reductions yielding a seasonally adjusted net 14 percent planning price hikes, unchanged from September. PROFITS AND WAGES Reports of positive earnings trends were a point better in October at a net negative 26 percent of all owners, not a pretty picture, but still one of the best readings in years. Compensation costs are rising, but not at a rapid rate. Seasonally adjusted, a net 7 percent reporting higher worker compensation, a 1 point decline. A seasonally adjusted 8 percent plan to raise compensation in the coming months, up 1 point. CREDIT MARKETS Four percent reported financing as their #1 business problem. Nine percent reported that not all of their credit needs were satisfied (the record low is 4 percent, reached in 2000). Thirty (30) percent of all owners reported borrowing on a regular basis, down 1 point and only 2 points above the record low. A net 11 percent reported loans harder to get compared to their last attempt (asked of regular borrowers only), up 1 point. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative 11 percent (more owners expect that it will be harder to arrange financing than easier), a 1 point improvement over September.

2 | NFIB Small Business Economic Trends Quarterly Report

COMMENTARY
Consumer spending improved a bit last quarter but prospects for future spending are still dismal. Consumer confidence posted only marginal gains over the last few months and confidence in economic policies remains at 50 year record low levels according to the University of Michigans consumer confidence survey where only 7% of household heads approve. In addition to the uncertainty surrounding Washingtons economic policies, the Greek plunge also looms as an economic threat. Yes, the U.S. can print money to pay our sovereign debt but the Greeks cant. Although printing money comes with its own set of problems, namely inflation. So its up to the Greeks and the E.U. figure out a solution. All of this uncertainly and dismal consumer sentiment does nothing to spur small business hiring and confidence, and the latest NFIB survey reflect this sentiment. From the perspective on Main Street, the Federal Reserve is out of bullets, not much it can do to reduce unemployment. It cant lower loan rates at most banks as floor rates are in effect and nobody wants to borrow as there are few investment opportunities in people or equipment no payoff with a lousy economy. The average rate reported on short-term money has been stuck around 6 percent for years now. The Federal Reserve has given it its best. Adding insult to injury, the U.S. fiscal policy is still in disarray. All that is proposed is higher spending, more regulations and increased taxes to support them. The Presidents jobs bill is poorly constructed as the incentives to hire are ineffective. Giving owners a temporary tax cut which are funded by permanent tax increases doesnt mean they will use the proceeds to hire workers that cant add enough value to cover their salaries. Washington seems to be avoiding the most important problems, namely the entitlement programs, that affect our out of control debt. Observers have continually warned about the bad ending that awaits those who live beyond their means creating the debt super-cycle. If this recession is not the ugly end predicted, it is certainly a warning of what will come if we dont change our ways.

3 | NFIB Small Business Economic Trends Quarterly Report

OVERVIEW - SMALL BUSINESS OPTIMISM

OPTIMISM INDEX
Based on Ten Survey Indicators
(Seasonally Adjusted 1986=100)
110

Index Value (1986=100)

100

90

80

70 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 YEAR

OPTIMISM INDEX
Based on Ten Survey Indicators
(Seasonally Adjusted 1986=100)

Jan 2007 98.9 2008 91.8 2009 84.1 2010 89.3 2011 94.1

Feb
98.2 92.9 82.6 88.0 94.5

Mar
97.3 89.6 81.0 86.8 91.9

Apr May
98.5 97.2 89.3 88.9 92.2 90.9 96.8 91.5 86.8 90.6 91.2

Jun
96.7 96.0 89.2 87.8 89.0 90.8

Jul Aug Sep

98.1 97.6 88.2 86.5 88.1 89.9 95.9 96.3 91.1 88.6 88.8 88.1 97.3 92.9 88.8 89.0 88.9

Oct Nov Dec

99.7 94.4 87.8 88.3 93.2 96.5 94.6 85.2 88.0 92.6 96.2 87.5 89.1 91.7 90.2

2006 101.1 101.5

98.0 100.1

99.4 100.7

SMALL BUSINESS OUTLOOK

OUTLOOK
4 | NFIB Small Business Economic Trends Quarterly Report

Good Time to Expand and Expected General Business Conditions

January Quarter 1974 to October Quarter 2011 (Seasonally Adjusted)
30 80 60 20 40 20 10 0 -20 0 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR -40

Percent "Good Time to Expand" (thick line)

Percent "Better" Minus "Worse" Expected General Business Conditions (thin line)

SMALL BUSINESS OUTLOOK (CONTINUED)

OUTLOOK FOR EXPANSION
Percent Next Three Months Good Time to Expand
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

20 17 9 6 5 8

Feb
20 18 8 3 4 7

Mar
19 12 5 1 2 5

Apr May Jun

18 12 6 4 4 4 18 12 4 5 5 5 13 13 4 4 6 4

Jul
16 16 6 5 5 6

Aug Sep
13 12 6 5 4 5 18 14 11 9 6 6

Oct
20 14 5 7 7 7

Nov Dec
17 13 7 8 9 17 14 7 7 8

MOST IMPORTANT REASON FOR EXPANSION OUTLOOK

Reason Percent by Expansion Outlook
October 2011

Reason Economic Conditions Sales Prospects Fin. & Interest Rates Cost of Expansion Political Climate Other/Not Available

Good Time
1 2 1 1 0 0

Not Good Time

49 5 1 3 13 3

Uncertain
12 1 0 1 4 2

Net Percent (Better Minus Worse) Six Months From Now

(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

6 -1 -22 -12 1 10

Feb
3 -2 -9 -21 -9 9

Mar
-5 -7 -23 -22 -8 -5

Apr May
-3 -8 -12 2 0 -8 -10 -3 -12 12 8 -5

Jun
-8 -5 -19 7 -6 -11

Jul Aug Sep

-6 -1 -17 -3 -15 -15 -8 0 4 10 -8 -26 2 2 14 8 -3 -22

Oct Nov Dec

11 -2 -4 11 8 -16 11 -10 -2 3 16 12 -4 -13 2 9

5 | NFIB Small Business Economic Trends Quarterly Report

OUTLOOK FOR GENERAL BUSINESS CONDITIONS

SMALL BUSINESS EARNINGS

EARNINGS
Actual Last Three Months
January Quarter 1974 to October Quarter 2011 (Seasonally Adjusted)
0 -10

Net Percent

-20 -30 -40 -50 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

ACTUAL EARNINGS CHANGES

Net Percent (Higher Minus Lower) Last Three Months Compared to Prior Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

-16 -21 -27 -47 -42 -28

Feb
-15 -19 -25 -44 -39 -27

Mar
-12 -15 -33 -46 -43 -32

Apr May
-13 -19 -28 -43 -31 -26 -11 -15 -28 -43 -28 -24

Jun
11 -18 -33 -42 -32 -24

Jul Aug Sep

-16 -17 -37 -45 -33 -24 -19 -22 -30 -40 -30 -26 -8 -20 -35 -40 -33 -27

Oct Nov Dec

-14 -18 -35 -40 -26 -26 -18 -25 -38 -43 -30 -15 -20 -42 -43 -34

6 | NFIB Small Business Economic Trends Quarterly Report

MOST IMPORTANT REASON FOR LOWER EARNINGS

Percent Reason
October 2011

Reason Sales Volume Increased Costs* Cut Selling Prices Usual Seasonal Change Other

Current Month
21 11 3 4 1

One Year Ago

24 7 3 3 3

Two Years Ago

32 7 4 4 5

* Increased costs include labor, materials, finance, taxes, and regulatory costs.

SMALL BUSINESS SALES

SALES
Actual (Prior Three Months) and Expected (Subsequent Three Months)
January 1974 to October 2011 (Seasonally Adjusted)
50 40 30 20 10 0 -10 -20 -30 -40 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR
Expected Actual

Net Percent

ACTUAL SALES CHANGES

Net Percent (Higher Minus Lower) Last Three Months Compared to Prior Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

2 -3 -7 -31 -26 -11

Feb
6 -1 -8 -28 -26 -11

Mar
5 0 -11 -34 -25 -12

Apr May Jun

6 4 -9 -28 -15 -5 11 1 -11 -33 -11 -9 6 -4 -12 -34 -15 -7

Jul
3 -1 -15 -34 -16 -8

Aug Sep
2 -4 -10 -27 -16 -9 5 -4 -11 -26 -17 -10

Oct
2 -4 -21 -31 -13 -12

Nov Dec
0 -3 -25 -31 -15 3 1 -29 -25 -16

SALES EXPECTATIONS
Net Percent (Higher Minus Lower) During Next Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

24 22 4 -20 3 13

Feb
28 17 0 -29 0 14

Mar
12 14 -3 -31 -3 6

Apr May Jun

21 14 -3 -11 6 5 20 16 -11 -5 5 3 13 11 -11 -10 -5 0

Jul
18 14 -9 -11 -4 -2

Aug Sep
10 13 -6 -5 0 -12 17 14 -2 -6 -3 -6

Oct
17 13 -16 -4 1 -4

Nov Dec
21 8 -14 -2 6 18 6 -18 -1 8

7 | NFIB Small Business Economic Trends Quarterly Report

SMALL BUSINESS PRICES

PRICES
Actual Last Three Months and Planned Next Three Months
January Quarter 1974 to October Quarter 2011 (Seasonally Adjusted)
70 60 50 40 30 20 10 0 -10 -20 -30 YEAR

Actual Planned

Net Percent

74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

ACTUAL PRICE CHANGES

Net Percent (Higher Minus Lower) Compared to Three Months Ago
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

18 12 8 -15 -18 -4

Feb
23 13 13 -24 -21 5

Mar
17 15 18 -23 -20 9

Apr May
26 18 20 -24 -11 12 24 16 23 -22 -15 15

Jun
23 19 29 -17 -13 10

Jul Aug Sep

23 19 32 -19 -11 7 22 13 26 -19 -8 1 20 9 20 -21 -11 6

Oct Nov Dec

16 15 15 -17 -5 -1 17 14 0 -17 -4 8 16 -6 -22 -5

8 | NFIB Small Business Economic Trends Quarterly Report

PRICE PLANS
Net Percent (Higher Minus Lower) in the Next Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

29 24 26 2 8 19

Feb
27 23 22 1 10 21

Mar
26 22 29 0 9 24

Apr May
28 24 31 1 13 24 30 23 32 3 14 23

Jun
29 21 36 5 11 15

Jul Aug Sep

30 23 38 5 10 19 29 22 30 8 10 16 22 21 24 6 7 14

Oct Nov Dec

21 22 18 5 12 14 22 26 11 4 13 26 26 3 3 15

SMALL BUSINESS EMPLOYMENT

ACTUAL EMPLOYMENT CHANGES
Net Percent (Increase Minus Decrease) in the Last Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

1 2 0 -15 -10 -4

Feb
4 4 -3 -15 -9 -2

Mar
-1 -6 -7 -22 -11 -4

Apr May Jun

-3 -5 -9 -25 -12 -6 -3 -2 -10 -24 -12 -3 -2 0 -12 -23 -10 -7

Jul
2 1 -5 -17 -5 -2

Aug Sep
5 4 -4 -16 -2 -2 -3 -1 -10 -16 -3 -5

Oct
5 3 -9 -12 -6 0

Nov Dec
0 0 -10 -12 -2 3 2 -18 -12 -1

QUALIFIED APPLICANTS FOR JOB OPENINGS

Percent Few or No Qualified Applicants
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

40 41 37 * 24 28

Feb
40 41 36 * 26 30

Mar
39 43 36 24 23 29

Apr May
41 43 37 24 26 32 46 42 33 25 26 30

Jun
45 45 39 27 25 33

Jul Aug Sep

42 43 36 26 28 31 46 44 35 23 32 33 44 48 38 25 30 34

Oct Nov Dec

46 46 35 25 28 31 44 40 31 28 27 40 37 30 21 28

Planned Next Three Months and Current Job Openings

January Quarter 1974 to October Quarter 2011 (Seasonally Adjusted)
40 30

20 10 0 -10 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR
Planned Job Openings

9 | NFIB Small Business Economic Trends Quarterly Report

EMPLOYMENT

Percent

SMALL BUSINESS EMPLOYMENT (CONTINUED)

JOB OPENINGS
Percent With Positions Not Able to Fill Right Now
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

26 26 24 11 10 13

Feb
26 25 20 11 11 15

Mar
23 26 19 10 9 15

Apr May
31 26 21 9 11 14 25 24 15 9 9 12

Jun
25 26 21 11 9 15

Jul Aug Sep

24 23 17 9 10 12 25 25 15 8 11 15 25 25 18 8 11 14

Oct Nov Dec

27 22 14 8 10 14 22 19 14 8 9 19 21 14 10 13

HIRING PLANS
Net Percent (Increase Minus Decrease) in the Next Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

17 17 9 -6 -1 3

Feb
16 13 11 -3 -1 5

Mar
9 12 3 -10 -2 2

Apr May
16 13 5 -5 -1 2 14 13 2 -5 1 -1

Jun
9 12 5 -1 1 3

Jul Aug Sep

15 13 5 -3 2 2 17 15 9 0 1 5 17 14 7 -4 -3 4

Oct Nov Dec

16 11 0 -1 1 3 19 11 -4 -3 4 10 11 -6 -2 6

10 | NFIB Small Business Economic Trends Quarterly Report

SMALL BUSINESS COMPENSATION

COMPENSATION
Actual Last Three Months and Planned Next Three Months
January 1986 to October 2011 (Seasonally Adjusted)
40 35 30 25 20 15 10 5 0 -5

Net Percent

Planned Higher Actual Higher

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 102011 YEAR

SMALL BUSINESS COMPENSATION (CONTINUED)

ACTUAL COMPENSATION CHANGES
Net Percent (Increase Minus Decrease) During Last Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

25 26 25 7 1 10

Feb
24 30 23 1 -2 8

Mar
22 28 24 0 0 7

Apr May
27 26 20 0 3 9 24 29 15 0 2 9

Jun
22 26 20 -2 4 8

Jul Aug Sep

24 27 18 1 3 10 25 24 18 1 3 9 28 27 17 3 3 8

Oct Nov Dec

23 26 15 0 4 7 25 21 13 0 8 21 24 9 3 8

COMPENSATION PLANS
Net Percent (Increase Minus Decrease) in the Next Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

16 16 12 3 1 5

Feb
20 19 12 3 6 7

Mar
16 19 15 0 3 9

Apr May Jun

19 18 14 2 5 7 15 16 8 1 4 7 14 15 12 3 3 7

Jul
17 16 12 4 5 6

Aug Sep
16 14 11 3 6 7 16 19 10 3 3 7

Oct
18 16 9 5 5 8

Nov Dec
20 15 10 1 5 17 14 4 1 3

PRICES AND LABOR COMPENSATION

Net Percent Price Increase and Net Percent Compensation Increase
(Seasonally Adjusted)
70 60 50 40 30 20 10 0 -10 -20 -30 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR 40 35 30 25 20 15 10 5 0
Labor Compensation (Thin Line)

11 | NFIB Small Business Economic Trends Quarterly Report

Prices (Thick Line)

SMALL BUSINESS CREDIT CONDITIONS

CREDIT CONDITIONS
Loan Availability Compared to Three Months Ago*
January Quarter 1974 to October Quarter 2011
4 0 -4 -8 -12 -16 -20 -24 -28 -32 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR
* For the population borrowing at least once every three months.

Net Percent

REGULAR BORROWERS
Percent Borrowing at Least Once Every Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

37 37 36 35 32 31

Feb
38 39 34 36 34 31

Mar
36 35 33 33 35 29

Apr May Jun

40 37 36 33 31 32 38 38 35 34 32 29 41 35 35 30 29 29

Jul
38 36 34 33 32 30

Aug Sep
46 35 34 32 31 32 35 36 32 33 33 31

Oct
37 36 33 33 31 30

Nov Dec
38 32 31 33 28 35 34 33 33 30

12 | NFIB Small Business Economic Trends Quarterly Report

AVAILABILITY OF LOANS
Net Percent (Easier Minus Harder) Compared to Three Months Ago
(Regular Borrowers)

Jan 2006 2007 2008 2009 2010 2011

-5 -5 -7 -13 -14 -10

Feb
-5 -5 -5 -13 -12 -11

Mar
-6 -7 -7 -12 -15 -8

Apr May
-4 -5 -9 -14 -14 -9 -5 -6 -8 -16 -13 -10

Jun
-5 -5 -7 -14 -13 -9

Jul Aug Sep

-6 -5 -9 -15 -13 -10 -8 -7 -10 -14 -12 -13 -3 -9 -11 -14 -14 -10

Oct Nov Dec

-6 -6 -9 -14 -11 -11 -6 -7 -11 -15 -11 -6 -7 -12 -15 -12

SMALL BUSINESS CREDIT CONDITIONS (CONTINUED)

BORROWING NEEDS SATISFIED
Percent of All Businesses Last Three Months Satisfied/ Percent of All Businesses Last Three Months Not Satisfied
(Borrowers Only)

Jan 2006 36/4 2007 36/5 2008 34/5 2009 33/8 2010 27/11 2011 28/8

Feb
37/6 40/5 35/4

Mar
36/6 35/5 32/6

Apr May Jun

38/5 38/4 34/5 30/8 28/9 28/8 38/5 39/6 34/7 39/5 36/4 35/5

Jul
38/4 37/5 32/7

Aug Sep
44/4 35/4 35/6 34/4 37/5 33/6

Oct
36/7 36/6 31/6

Nov Dec
34/4 32/4 31/7 36/5 32/7 32/6 28/8 28/9

32/8 29/10 29/9 29/11 29/8 28/7

28/9 30/10 28/10 28/8 25/10 28/8 25/9 27/9 28/8

30/7 30/10 27/9 28/7 27/9 29/8

29/9 29/10 26/9 28/9 25/9

EXPECTED CREDIT CONDITIONS

Net Percent (Easier Minus Harder) During Next Three Months
(Regular Borrowers)

Jan 2006 2007 2008 2009 2010 2011

-6 -7 -9 -14 -13 -10

Feb
-7 -8 -8 -16 -14 -10

Mar
-7 -8 -9 -14 -16 -9

Apr May
-8 -7 -11 -12 -15 -13 -8 -6 -10 -15 -12 -11

Jun
-8 -6 -10 -13 -13 -10

Jul Aug Sep

-7 -6 -12 -14 -14 -11 -9 -9 -11 -13 -14 -13 -5 -10 -13 -15 -14 -12

Oct Nov Dec

-6 -8 -16 -16 -12 -11 -5 -8 -13 -15 -10 -7 -10 -15 -15 -11

INTEREST RATES
Relative Rates and Actual Rates Last Three Months
January Quarter 1974 to October Quarter 2011
50 40 30 20

20 10 0 -10 -20 -30 -40 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

15

10

13 | NFIB Small Business Economic Trends Quarterly Report

Relative (thick line)

Actual (thin line)

SMALL BUSINESS CREDIT CONDITIONS (CONTINUED)

RELATIVE INTEREST RATE PAID BY REGULAR BORROWERS*
Net Percent (Higher Minus Lower) Compared to Three Months Ago

Jan 2006 2007 2008 2009 2010 2011

26 17 0 -12 6 3

Feb
32 21 -9 -9 6 6

Mar
29 19 -5 -1 9 5

Apr May
32 16 -12 -2 5 5 28 15 -15 0 4 3

Jun
30 12 -11 0 0 0

Jul Aug Sep

30 12 -4 3 2 0 34 14 -2 3 3 1 22 15 -3 5 1 1

Oct Nov Dec

20 4 -2 3 1 -2 23 3 -6 8 0 16 1 -8 3 1

*Borrowing at Least Once Every Three Months.

ACTUAL INTEREST RATE PAID ON SHORT-TERM LOANS BY BORROWERS

Average Interest Rate Paid

Jan 2006 2007 2008 2009 2010 2011

8.1 9.1 8.3 6.4 6.3 6.0

Feb
8.3 9.3 8.1 6.2 6.0 6.0

Mar
8.0 9.3 8.3 6.2 6.8 5.9

Apr May Jun

8.7 9.2 7.7 6.1 6.4 6.5 8.1 9.5 6.9 6.3 6.5 6.0 8.7 9.3 7.1 6.5 6.0 6.0

Jul
9.1 9.2 7.0 6.5 6.3 5.9

Aug Sep
9.0 8.7 6.9 6.1 6.3 6.1 8.8 9.0 7.1 6.1 6.2 6.1

Oct
8.8 9.1 6.6 6.0 6.0 6.2

Nov Dec
8.3 8.5 7.0 5.9 5.7 9.8 8.5 6.6 6.3 6.2

14 | NFIB Small Business Economic Trends Quarterly Report

SMALL BUSINESS INVENTORIES

INVENTORIES
Actual (Last Three Months) and Planned (Next Three Months)
January Quarter 1974 to October Quarter 2011 (Seasonally Adjusted)
15 10 5 0

Net Percent

-5 -10 -15 -20 -25 -30 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

Actual Planned

SMALL BUSINESS INVENTORIES (CONTINUED)

ACTUAL INVENTORY CHANGES
Net Percent (Increase Minus Decrease) During Last Three Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

3 1 -4 -18 -21 -10

Feb
1 5 -2 -19 -18 -8

Mar
6 2 -7 -23 -18 -7

Apr May Jun

0 -2 -10 -27 -18 -9 -2 2 -12 -27 -20 -13 0 -5 -11 -27 -21 -14

Jul
0 -2 -14 -27 -19 -13

Aug Sep
3 -3 -13 -24 -15 -9 1 -2 -12 -24 -14 -11

Oct
0 -1 -13 -26 -16 -10

Nov Dec
0 -6 -17 -25 -15 -3 -3 -21 -28 -13

INVENTORY SATISFACTION
Net Percent (Too Low Minus Too Large) at Present Time
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

-1 -2 -4 -6 -1 0

Feb
-2 -2 -4 -5 -1 2

Mar
0 -5 -1 -4 -1 -1

Apr May Jun

-1 -3 -1 -5 1 1 -1 -6 -3 -2 0 -1 -1 -7 -1 -5 -1 -1

Jul
-2 -2 -4 -4 0 0

Aug Sep
-6 -2 -3 -4 -1 1 -6 -3 -1 0 -2 -1

Oct
-3 -7 -4 -3 1 0

Nov Dec
-6 -3 -4 -2 -3 -7 -3 -7 -4 -3

INVENTORY PLANS
Net Percent (Increase Minus Decrease) in the Next Three to Six Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

5 2 -4 -10 -4 -1

Feb
7 3 -2 -10 -7 -2

Mar
3 3 -2 -13 -7 1

Apr May Jun

2 3 -1 -7 -2 -1 3 0 -4 -3 2 -3 0 -3 -5 -6 -3 -3

Jul
1 2 -4 -5 -4 -3

Aug Sep
-1 -4 -9 -7 -7 -5 -1 0 -3 -6 -3 -2

Oct
4 1 -5 -3 -4 0

Nov Dec
0 2 -6 -3 0 0 -3 -4 -8 -3

15 | NFIB Small Business Economic Trends Quarterly Report

SMALL BUSINESS CAPITAL OUTLAYS

INVENTORY SATISFACTION AND INVENTORY PLANS
Net Percent (Too Low Minus Too Large) at Present Time Net Percent Planning to Add Inventories in the Next Three to Six Months
15 10 5
Percent

(Seasonally Adjusted)

0 -5 -10 -15 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

Satisfaction Plans

CAPITAL EXPENDITURES
Actual Last Six Months and Planned Next Three Months
80

January Quarter 1974 to October Quarter 2011 (Seasonally Adjusted)

60

Percent

40

20

Actual Plans

0 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

YEAR

16 | NFIB Small Business Economic Trends Quarterly Report

ACTUAL CAPITAL EXPENDITURES

Percent Making a Capital Expenditure During the Last Six Months

Jan 2006 2007 2008 2009 2010 2011

62 62 58 51 47 51

Feb
63 61 58 52 47 49

Mar
62 61 57 50 45 51

Apr May Jun

62 60 56 46 46 50 62 60 54 46 46 50 60 55 52 46 46 50

Jul
61 58 52 46 45 50

Aug Sep
62 58 54 45 44 52 63 60 52 44 45 50

Oct
62 61 54 45 47 52

Nov Dec
63 56 56 44 51 61 62 51 44 47

SMALL BUSINESS CAPITAL OUTLAYS (CONTINUED)

TYPE OF CAPITAL EXPENDITURES MADE

Percent Purchasing or Leasing During Last Six Months

Type Vehicles Equipment Furniture or Fixtures Add. Bldgs. or Land Improved Bldgs. or Land

Current
18 36 11 5 13

One Year Ago

16 32 9 3 12

Two Years Ago

17 31 9 3 11

AMOUNT OF CAPITAL EXPENDITURES MADE

Percent Distribution of Per Firm Expenditures During the Last Six Months

Amount $1 to $999 $1,000 to $4,999 $5,000 to $9,999 $10,000 to $49,999 $50,000 to $99,999 $100,000 + No Answer

Current
4 9 6 17 6 9 1

One Year Ago

4 9 6 15 6 7 0

Two Years Ago

3 9 5 16 5 7 0

CAPITAL EXPENDITURE PLANS

Percent Planning a Capital Expenditure During Next Three to Six Months
(Seasonally Adjusted)

Jan 2006 2007 2008 2009 2010 2011

32 30 25 19 20 22

Feb
35 30 26 18 20 22

Mar
31 33 25 16 19 24

Apr May Jun

33 29 26 19 19 21 28 29 25 20 20 20 27 28 26 17 19 21

Jul
31 27 21 18 18 20

Aug Sep
28 27 23 16 16 21 30 29 21 18 19 20

Oct
31 27 19 17 18 21

Nov Dec
31 27 21 16 20 26 30 17 18 21

17 | NFIB Small Business Economic Trends Quarterly Report

SINGLE MOST IMPORTANT PROBLEM

SINGLE MOST IMPORTANT PROBLEM
October 2011
One Year Ago
20 4 30 3 3 17 7 3 8 5

Problem Taxes Inflation Poor Sales Fin. & Interest Rates Cost of Labor Govt. Reqs. & Red Tape Comp. From Large Bus. Quality of Labor Cost/Avail. of Insurance Other

Current
18 6 26 4 4 19 6 6 7 4

Survey High
32 41 33 37 9 27 14 23 29 31

Survey Low
8 0 2 2 2 4 4 3 4 2

SELECTED SINGLE MOST IMPORTANT PROBLEM

Insurance, Big Business Competition, Inflation, and Regulation
January Quarter 1974 to October Quarter 2011
40
Big Business Insurance Regulation

30
Percent of Firms

Inflation

20

10

0 74
18 | NFIB Small Business Economic Trends Quarterly Report

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

YEAR
SELECTED SINGLE MOST IMPORTANT PROBLEM
Sales, Fin. & Interest Rates, Labor Cost, Labor Quality, and Taxes
January Quarter 1974 to October Quarter 2011
40
Taxes Interest Rates Sales Labor Quality

Percent of Firms

30

20

10

0 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 YEAR

SURVEY PROFILE
OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY NFIB
Actual Number of Firms

Jan 2006 1274 2007 1755 2008 1845 2009 2013 2010 2114 2011 2144

Feb
484 750 700 846 799 774

Mar

Apr May Jun

440 618 737 814 823 733

Jul

Aug Sep
480 720 812 882 874 926

Oct

Nov Dec
451 719 826 825 807 446 670 805 830 804

471 1094 737 1703 735 1768 867 1794 948 2176 811 1985

416 1007 589 1613 703 1827 758 1994 804 2029 766 1817

380 1075 674 1614 743 1992 827 2059 849 1910 729 2077

NFIB OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY

Industry of Small Business
30 25 20

Percent

15 10 5 0

Number of Full and Part-Time Employees

30 25 20

15 10 5 0

19 | NFIB Small Business Economic Trends Quarterly Report

NFIB OWNER/MEMBERS PARTICIPATING IN ECONOMIC SURVEY

Percent

NFIB RESEARCH FOUNDATION SMALL BUSINESS ECONOMIC SURVEY

SMALL BUSINESS SURVEY QUESTIONS PAGE IN REPORT

Do you think the next three months will be a good time for small business to expand substantially? Why? . . . . . . . . . . . . . . . 4 About the economy in general, do you think that six months from now general business conditions will be better than they are now, about the same, or worse? . . . . . . . . . . . . Were your net earnings or income (after taxes) from your business during the last calendar quarter higher, lower, or about the same as they were for the quarter before?. . . . . . . . . . . . .

If higher or lower, what is the most important reason?. . . . . . . . . . . . 6 During the last calendar quarter, was your dollar sales volume higher, lower, or about the same as it was for the quarter before?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overall, what do you expect to happen to real volume (number of units) of goods and/or services that you will sell during the next three months?. . . . . . . . . . . . . . . . . . . . . . . . . How are your average selling prices compared to three months ago?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In the next three months, do you plan to change the average selling prices of your goods and/or services? . . . . . . . . . . . . 8 During the last three months, did the total number of employees in your firm increase, decrease, or stay about the same?. . . . . . . . . . 9
20 | NFIB Small Business Economic Trends Quarterly Report

If you have filled or attempted to fill any job openings in the past three months, how many qualified applicants were there for the position(s)?. . . . . . . . . . . . . . . . . . . . . . . . . . . . Do you have any job openings that you are not able to fill right now?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

In the next three months, do you expect to increase or decrease the total number of people working for you? . . . . . . . . . . . 10 Over the past three months, did you change the average employee compensation?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Do you plan to change average employee compensation during the next three months?. . . . . . . . . . . . . . . . . . . . . . . . . . .

11

11

NFIB RESEARCH FOUNDATION SMALL BUSINESS ECONOMIC SURVEY

S MALL B USIN E SS S URVEY Q UE STI ONS P AGE
IN

R E POR T
12

Areloans easier or harder to get than they were three months ago? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . During the last three months, was your rm able to satisfy its borrowing needs? ...................................... Do you expect to nd it easier or harder to obtain your required nancing during the next three months?

13

....................

13

If you borrow money regularly (at least once every three months) as part of your business activity, how does the rate of interest payable on your most recent loan compare with that paid three months ago? ................................. If you borrowed within the last three months for business purposes, and the loan maturity (pay back period) was 1 year or less, what interest rate did you pay? ........................ During the last three months, did you increase or decrease your inventories? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . At the present time, do you feel your inventories are too large, about right, or inadequate? ................................. Looking ahead to the next three months to six months, do you expect, on balance, to add to your inventories, keep them about the same, or decrease them? ...................... During the last six months, has your rm made any capital expenditures to improve or purchase equipment, buildings, or land? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If [your rm made any capital expenditures], what was the total cost of all these projects? ................................ Looking ahead to the next three to six months, do you expect to make any capital expenditures for plant and/or physical equipment? ...................................... What is the single most important problem facing your business today? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Please classify your major business activity, using one of the categories of example below . ............................... How many employees do you have full and part-time, including yourself? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

14

15

15

15

16
21 | NFIB Small Business Economic Trends Quarterly Report

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18

19

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