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U.S. Economic Perspectives

Small Business Optimism Edges Up 

The NFIB Small Business Optimism Index edged up 0.6 points in October to 102.4. While the index peaked at 108.8 in August 2018, it remains elevated by historical standards and suggests that business conditions are still favorable. 

Eight of the ten NFIB components advanced last month, led by plans to increase capex and inventories. Small firms also plan to increase hiring in the next three months, but current job openings eased, touching their lowest level in nearly a year. Part of it was due to the tight labor market conditions, as a near-record high 53% of respondents reported difficulty finding qualified applicants. As a result, worker compensation plans picked up. But firms likely plan to pass that cost increase onto consumers, as price plans also advanced. The earnings trend weakened slightly, but the near-term outlook for real sales growth edged up. 

Labor quality topped the list on small businesses’ most important problems, with 25% of respondents, close to the survey high of 27%, citing it as their biggest problem. 

OECD U.S. CLI Points to Below-Trend Growth
The OECD U.S. Composite Leading Indicator (CLI) fell another 0.1 point in September to 98.8, its lowest level since November 2009, and below 100 for the tenth straight month, as the outlook for growth remained stuck in the below-trend territory. The CLI posted its 17th straight decline, the longest losing streak since April 2016, which was amidst the previous global economic slowdown. On a y/y basis, the CLI was off 1.7 points, near its steepest y/y decline since August 2009. 

Weekly Retail Sales Mixed
The Weekly Retail Chain Store Sales Index rose 1.8% last week, and was up 4.3% y/y, the most since April. But the Redbook same-store chain-store sales edged up only 0.1% in the first week of November, below the target of a 0.9% gain for the full month. Sales were up 5.0% y/y, also below the target of 5.8% y/y. Redbook noted that the official holiday shopping season (between Thanksgiving and Christmas) is six days shorter this year compared to last year, which may have an impact on the sales growth numbers.

Source: Ned Davis Research
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