Small business just ain't feeling it/Consumer survey/When I wake up in the morning...

I'm hoping you didn't stare too much at the sun yesterday and can read this today. 

Well, in this so called 'strong' economy, small business still ain't feeling it. The NFIB small business optimism index for March fell to 88.5 from 89.4 and that's the softest read since December 2012. Again, the US economy is MUCH more mixed than broadly strong that I hear so many say. 

And that strong March payroll report? Plans to Hire fell another 1 pt, down for a 4th straight month to 11%, the weakest since October 2016 not including Covid. Remember in last week's ADP report, small business, those with under 50 employees, hired only a net 16k and those staffed with 20-49 people actually shed 11k jobs. Those that that are still working are looking at higher compensation as these components rose after the February drop. Also, those planning on increasing capital spending fell to the lowest since April 2023 and no inventory restocking seen yet as plans to increase it remain deeply negative at -7%. 

While those that Expect a Better Economy rose 3 pts to a still very negative -36%, those that Expect Higher Sales fell 8 pts to the lowest since May 2023. As for a Good Time to Expand, only 4% said yes and that's the least since also May 2023. The earnings outlook did rise by 2 pts but at -29%, remaining very much below zero. Credit conditions softened by 2 pts after the 2 pt improvement last month. And, for those getting a loan, they are paying an average of 9.8%, matching at least an 11 yr high that this question goes back to. That is one high cost of capital for small business and why demand for loans has slackened too and the amount of C&I loans outstanding is just off the smallest level since September 2022. 

Finally, ahead of tomorrow's CPI, Higher Selling Prices jumped by 7 pts to 28%, a 5 month high and as seen in the chart below, maybe be bottoming. Higher inflation is back as the top business worry said the NFIB. 

The NFIB's bottom line "Small business optimism has reached the lowest level since 2012 as owners continue to manage numerous economic headwinds. Inflation has once again been reported as the top business problem on Main Street and the labor market has only eased slightly."

My bottom line, the US economy has pockets of strength but certainly pockets of weakness and only some cylinders are driving the bus. Monetary policy is restrictive for some and not for others. We can't paint this economic and market situation with broad brushes, it is MUCH more mixed and nuanced.