Small Business Optimism from the NFIB came in weaker than expected for the month of June, falling from 104.5 down to 103.6.  Economists had been forecasting a level of 104.4.  To illustrate just how strong this index has been of late, the 0.9 point downside move in June represents the largest m/m decline since February 2016!  Following June’s decline, the recent moves in the NFIB can be looked at from two different perspectives.  On the optimistic side, the index is still well above its historical average of 96.3 going back to 2000.  From the pessimistic side, however, the index has clearly lost momentum following the post-election surge, and in the process, it fell short of reaching its highs from the prior expansion.  The jury is still out on which side will prove to be correct.

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In terms of what issues small business owners consider to be their biggest problems, this month we saw some interesting moves.  The biggest of these was in Government Red Tape, which was cited by 19% of small business owners and up from 13% in May.  On a m/m basis, no other ‘problem’ saw an increase of more than 1 percentage point.  On the downside, respondents who were worried about the Quality of Labor and Cost of Insurance seem less worried now and instead are more focused on red tape.

This month’s increase in the percentage of respondents citing Government Red Tape as their number one problem is noteworthy due to the fact that it is the largest m/m increase on record.  Obviously, delays in Washington on reforming health care and reigning in regulations is weighing on sentiment.  Prior to this month, the two largest m/m increases in the “problem” of red tape were in January 2009 (Obama Inauguration) and April 2010 (the month after the Affordable Care Act was signed into law).  Amazingly, even after this month’s increase, the percentage of small business owners citing Government Red Tape as their number one problem is below where it was last October before the election.

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