NFIB Small Business Optimism Index September 2023 Results: It Ain't Pretty.

This is a follow up to a recent short post I did here on LinkedIn.

As I have written about for years, the NFIB or National Federation of Independent Business is a particularly valuable resource as it tracks SME sentiment and performance in the United States. Their Research Center has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since 1986. They draw data from the membership files of the NFIB, and I am allowed to reproduce their Small Business Economic Trends items if/when I cite the publication name and date and note it is a copyright of the NFIB Research Center. ? NFIB Research Center. ISBS #0940791- 24-2. Chief Economist William C. Dunkelberg and Executive Director of the NFIB Research Center Holly Wade are responsible for this report.

There is no way to sugarcoat the most recent results of the NFIB Small Business Optimism Index for September 2023 that was published this week; namely that the outlook expressed by American entrepreneurs for the near-term United States economy stinks. Perhaps it should name our friend the skunk as the official mascot of SMEs in the United States today.

As can be seen below on the table reproduced from their September report, the Small Business Economic Trends NFIB Monthly Economic Newsletter – September 2023 fell to only 90.8 and this is the 20th consecutive month below the 49-year average of ninety-eight.

Twenty-three percent of owners reported that inflation was their single most important problem in operating their business, up two points from last month but lagging “quality of labor” at 24 percent. Owners expecting better business conditions over the next six months deteriorated seven points from July to a net negative 37 percent. The net percent of owners who expect real sales to be higher decreased two points from July to a net negative 14 percent, a very dismal posture.

Source: NFIB Small Business Economic Trends NFIB Monthly Economic Newsletter – September 2023 ? NFIB 2023.

What is even more depressing is the fact that if you look only at the month of September results for each year over the period 2018 to 2023, the Index has slid to its’ lowest level ever for the month of September and is down almost 16% over the 5-year period. Even in the depths of the COVID-19 pandemic, the overall Index and outlook by SMEs in the United States was materially higher than it is today.

This fact is not just depressing but quite concerning. As we know. SMEs are the true backbone of the American economy and when they succeed, the overall United States economy follows suit. When they fail, we fail. There is growing evidence that more and more SMEs are failing due to rampant inflation that has eroded consumer buying power and SMEs margins, record high gasoline, grocery, automobile and housing costs, increased labor costs and record high mortgage, installment, and automobile interest costs today.

A recent article published October 4, 2o23 in the Retail Dive online pointed out these equally sobering statistics about SMEs bankruptcies in the United States:

1.???? Chapter 11 filings by United States businesses have soared so far this year, according to American Bankruptcy Institute data.

2. For the first nine months of 2023, commercial Chapter 11 bankruptcies have soared 61% year over year to 4,553, according to Epiq Bankruptcy, which provides U.S. bankruptcy filing data.

1. Small business filings in that time rose 41% to 1,419, according to the research, released by Epiq and the American Bankruptcy Institute.
2. Consumers are not far behind. Consumer bankruptcy filings are up 17% year to date.

As I also have written extensively on, the American consumer is now more than $1.8 trillion in debt on a macro basis and credit card delinquencies are increasing rapidly in card issuing banks and non-banks alike. It is important to keep in mind that these negative trends all have occurred before the October 1, 2023, required reinstatement of payments on the over $1 trillion of student loan debt that were deferred (not forgiven) in the COVID-19 pandemic era.

In summary and conclusion, all of the tea leaves point to an even more challenging fall and winter period for many if not most SMEs in the United States financially. There are few signs that any of the macro trends now embedded into the American economy will change soon and this means we are likely to see even lower SME Sentiment for Q4 and into 2024. If or when the American consumer retrenches and cuts back their current spending spree, all bets are off and the United States economy could tank to levels not seen since the Great Recession of 2008.