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Small Business Optimism Index Down 2.3 Points

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WASHINGTON (11/13/13)--Small business optimism fell to a seven-month low in October, reflecting a general economic malaise in the U.S. resulting from the partial government shutdown.
 
The National Federation of Independent Business said on Tuesday that its Small Business Optimism Index fell last month by 2.3 points to 91.6. The survey, which polls 1,940 business owners, was conducted amid the budget negotiation crisis in Washington that flirted with the sovereign debt default (Reuters via Chicago Tribune Nov. 12).
 
Seven of the confidence index's 10 components fell, while only three had dipped in September (FoxBusiness.com Nov. 12).  Small business owners expressed pessimism about future sales, job creation, capital and inventory expenditure plans, general economic outlook, sales, and credit availability (Moody's Economy.com Nov 12).
 
In addition to the 8% of index survey respondents who said they expected credit conditions to worsen,  6% of respondents said that "credit is harder to get" in a separate NFIB measure, fueling concerns that financial markets are suffering long-term consequences because of congressional dysfunction. With the U.S. Small Business Administration unable to service loans during the shutdown, loan volumes in October dropped 55% compared to what they were in October 2012, although they managed to edge toward 25% below the year-ago number measured at the end of the month (Economy.com Nov 12).
 
The Credit Union National Association has been urging Congress to allow credit unions to play a larger role in helping small businesses through member business loans (MBLs). The statutory cap on MBLs loans, as a proportion of credit union's assets, is currently 12.25%. CUNA says that raising the federal government-mandated ceiling to 25.5% would inject $13 billion into the economy, and help boost employment by 140,000 at no cost to taxpayers.

National Activity Index For September Increases

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CHICAGO, Ill. (11/13/13)--A prominent measure of economic production increased slightly in September.
 
The Federal Reserve Bank of Chicago released its September National Activity Index data on Tuesday, showing a modest rise in the indicator to 0.14, up from 0.13 in August.
 
Production-related components of the index rose to 0.19 in September, up from 0.17 in August, while a subset measure of sales, orders and inventories was up to 0.05 from 0.04. Rounding out the composite index, a gauge of consumption and housing fell to -0.18 from -0.17, while a measure of employment held steady at 0.08 (4-traders.com Nov. 12).
 
The three-month moving average of the index also increased in September to -0.03 from -0.15, although the index remaining less-than-zero indicates that growth is historically sluggish. This was the seventh straight month that the moving average gave a negative reading, indicating that inflation should be modest over the next year (Moody's Economy.com Nov. 12).
 
The modest September gains, however, don't account for October's partial government shutdown. October's index will be released by the Chicago Fed on Nov. 27, two days behind schedule. September's findings were originally scheduled to be released on Oct. 21.
 
Some measures show that the shutdown had only a temporary effect on key components of the economy, although another round of congressional budget negotiations in early 2014 could hamper the aggregate demand, and labor and financial markets (Economy.com, Nov. 12).