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Have We Reached Bottom Yet in the Economy?





From average citizens to billionaire Warren Buffett, some have been convinced that the United States is in a recession. The University of Michigan reports that 9 out of 10 consumers think the economy is in a recession. Warren Buffett has now famously declared that in his opinion we are in a recession.

Of course, many do not agree that we are in a recession. And certain signs in the past few weeks suggest things may not be as bad as feared. James Cooper writes over at BusinessWeek:

Recession is still very much a matter of opinion, not a matter of fact. Some economists are even taking at least a half-step back from their previous beliefs that a downturn is all but inevitable. So far, most of the economic data outside of homebuilding and house prices have not met the recession forecasters’ downbeat expectations. Businesses are reining in their capital spending, but not dramatically. Employment losses have not matched the size of those in past recessions. And even consumer spending through April, at least outside of flagging auto sales, is holding up far better than expected.

So what do small business owners think about the economy?

According to the most recent Small Business Economic Trends report by the NFIB, the sentiment of small business owners remains near record lows. However, it improved slightly during April. Here is the chart:

NFIB Optimism Index - April 2008

The blue circle shows the March small business optimism index ranking, at 89.6, the lowest in five years. The red arrow shows that optimism increased a bit in April, to 91.5. That’s still low, but at least the move was in the right direction — up.

Remember that sentiment is about how confident business owners feel about the economy and the decisions they are making to spend, hire and otherwise run their businesses. It’s not a measure of actual results.

But could this slight improvement mean that small business sentiment is on the upswing, and that businesses will start spending more and expanding?

Hard to tell based on just one month’s data. Let’s hope so.

11 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

11 Reactions

  1. Mark Anderson

    I dunno if w’ve reached the bottom yet, but I just bought some new tech for the office, and I’ve got my web team and designer hard at work on new projects, so I guess I’m .000000000000000000000000000000001 % of that 91.5.

  2. It’s really hard to think of a recession when you still find loads of people out and about shopping at your local mall or home improvement store. Is everyone really spending their stimulus checks? If they do, maybe that will make more businesses more optimistic.

  3. It’s a recession. Inflation + high unemployment rate + low morale. But, that’s okay. All things must balance out-including the economy.

    Great time to polish up the services and focus more time on value creation.

  4. That’s because if the government says it is a recession, then everyone will panic and everything goes downhill. Think of it this way, people tend to live longer when they have cancer but don’t know of it. What we know may kill us.

  5. Martin Lindeskog

    Martin Lindeskog

    As I said before, study the Purchasing Managers Index and you will see a pattern.

    http://www.ntceconomics.com/

  6. I heard someone say the other day that if my neighbor and my cousin and other people I know lose their jobs, we’re in a Recession. If I lose my job, we’re in a Depression! While people seem to be more cautious and there’s lots of conversation about high utility costs, I don’t think we’ll abandon our consumer mentality very soon. We’re still driving anywhere, anytime and still buying stuff we don’t need. So, we probably need to have some economic right-sizing sometime soon so that we don’t crash. I have a lot more than a job at stake, I have a company with 15 people who need their jobs. But, I started North Star Marketing in the middle of a real recession and we’ve lived to tell about it.

    Kae Wagner
    http://www.northstar-m.com
    http://www.insidesmallbiz.com

  7. It sure feels like a recession!

  8. Martin Lindeskog

    Martin Lindeskog

    I will write a longer comment on how I and others are using the PM Index. For a background, check out: http://www.answers.com/topic/purchasing-managers-index

  9. Martin Lindeskog

    Martin Lindeskog

    As a follow-up. Yes, it is low point in the economy for many reasons. My leading indicator is the Purchasing Manager Index. I discussed this tool with a purchasing and logistics association today at the big logistics & transport fair in Gothenburg, Sweden. They said that they had to promote the index more, so it could be as recognized as it is in America. Alan Greenspan followed the PMI very closely. Here is an excerpt from an old article in Business Week:

    “The report that Greenspan loves to watch is called the Purchasing Managers’ Index (PMI). Based on data from 350 to 400 NAPM members working in manufacturing, it ”has a fairly robust track record of accurately predicting trends in the economy,” says economist Joseph Liro of consultants Stone & McCarthy Research Associates in Princeton, N.J. For instance, the PMI turned downward a year before the 1990-91 recession. It also signaled the factory slowdown in 1997 and 1998, when the Asian financial crisis cut into demand for U.S. exports.”
    http://daedua.notlong.com

    From “The Spring 2008 State of U.S. Manufacturing” by Fred White:

    “American manufacturers continue to contend with lower demand as well as high costs for health care, raw materials and energy. As if this weren’t enough, a crumbling infrastructure and switch in the Oval Office present more supply-chain risk and more unknowns.

    Is economic recovery coming soon or is it still far off?

    Manufacturing has cooled as spending has slowed, reports Bloomberg News. The Institute for Supply Management’s (ISM’s) Purchasing Manager’s Index, remained at 48.6 repeating March’s figure.”
    http://eophix.notlong.com

    Go to the latest report (Institute for Supply Management):
    http://www.ism.ws/ISMReport/MfgROB.cfm

  10. I am a self employed electrician and I did not feel the effects of the recession until feb,March and april of this year. I am now just getting back to work , the business has been more service oriented. The fat remodeling jobs are now history. It has been a very difficult spring for myself and other tradesmen that i associate with, hopefully the economy will start to grow now and continue .

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    Todays Current Events in our Economy » Alert - United States Economy Recession

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