While we have been seeing some stabilization/improvement in macro manufacturing indicators, small business sentiment remains weak. Just this morning, the monthly Small Business Optimism Index from the NFIB came in below forecasts for the fourth time in the last five months. While economists were expecting the headline index to rebound slightly from last month’s reading of 93.9, the actual reading came in at 92.9, which is the lowest level for the headline index in two years.
Looking at the chart below, a couple of things stand out. First, the rebound in small business sentiment during the current expansion has been a lot more tepid than average relative to prior periods. From the end of the recession in 2009, it took more than five years for the optimism index to even return to above average levels, and once it got there it didn’t stay long. In fact, there have only been four months during the entire cycle where the Optimism index registered readings above the average of 96.03 since 2000. The second trend worth pointing out is that this month’s decline now puts the headline index down 7.4 points from its cycle high of 100.3 in December 2014. That now makes the index’s current decline the largest peak to trough drop of the entire expansion dating back to June 2009.