Between February and March, the National Federation of Independent Business Small Business Optimism Index plummeted from 104.5 to 96.4.
This historic decline is a very bad omen for the nation’s economic outlook. Combined with unprecedented unemployment data, it reveals that the core U.S. economy is set to take a massive hit from the coronavirus. And it’s unlikely to recover anytime soon.
Coronavirus Infects Business Optimism
The U.S. economy is set to take a massive hit from the coronavirus. And it’s unlikely to recover anytime soon. | Source: Viacheslav Lopatin/Shutterstock.com
Tuesday’s reading is the largest monthly drop in optimism since NFIB began compiling the index in 1986.
And the record drop ends a 39-month run of strong small business sentiment. In other words, the coronavirus has erased the gradual improvement the U.S. economy had enjoyed over the past three years.
For U.S. small business sentiment, it’s almost like the last three years didn’t happen. | Source: NFIB
And make no mistake, the NFIB is blaming the coronavirus for the record plunge in business confidence.
The business impact of Covid-19 has shaken the small business sector. The economic disruptions felt on Main Street escalated over the month as an increasing number of small businesses rapidly scaled back operations or closed their doors altogether.
U.S. businesses expect even worse days ahead. The NFIB writes that they anticipate “continued economic disruptions going forward.”
Nine out of ten components of the optimism index recorded marked falls. There was a 31-point dive in expectations of increased sales. And a 13-point fall for businesses thinking the next three months would be a good time to expand. That made it unsurprising to see a 12-point decline in U.S. businesses expecting to increase employment.
Business confidence is moving in the wrong direction. | Source: NFIB
Additionally, there was also a 17-point fall in confidence that the economy will improve. If this pessimism is justified, then U.S. business optimism is likely to accelerate its downwards trajectory as the coronavirus pandemic continues its forward march.
U.S. Economy Could Be Trapped in a Vicious Circle
Small businesses are right to suspect that the U.S. economy will get much worse before it gets better.
Goldman Sachs predicts that the coronavirus will cause U.S. economic output to fall by 34% in the second quarter. The bank expects the unemployment rate to surge to 15% by the second half of 2020.
Taken together, it’s entirely understandable that U.S. business optimism has experienced its biggest ever monthly fall. All economic indicators are pointing to a sharp recession, or even a lasting depression.
But it’s remarkably telling just how quickly and how sharply these negative indicators have affected business confidence.
And it’s likely that the collapse of U.S. business optimism will help create a self-fulfilling prophecy. Because when businesses expect a sharp contraction, they reduce their output. And when they reduce their output, the U.S. economy contracts. And so on.
That’s why the NFIB’s report is so significant. It forewarns just how bad the coming recession is going to be.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
