November 12, 2024
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Small business optimism rose points in October to 93.7 after having climbed 0.3 point in September. The level is well below the 40-year average so-called breakeven point for this series which is 98.0.
NFIB Chief Economist William Dunkelberg said, “With the election over, small business owners will begin to feel less uncertain about future business conditions. Although optimism is on the rise on Main Street, small business owners are still facing unprecedented economic adversity. Low sales, unfilled jobs openings, and ongoing inflationary pressures continue to challenge our Main Streets, but owners remain hopeful as they head toward the holiday season.”
We expect to see GDP growth of 2.5% growth in the fourth quarter followed by roughly comparable growth in 2025. . The economy still seems to be growing at respectable pace with no hint of a recession in sight.
The core CPI is expected to slow to 3.2% by yearend which is still well above the Fed’s 2.0% target pace. It should continue to moderate to 2.5% by the end of 2025. The Fed does not expect the core rate of inflation to return to 2.0% until 2026.
The funds rate currently is 4.6%. The Fed will continue to lower rates gradually through the middle of next year. The so-called “neutral” funds rate used to be about 2.8% but it now appears to be higher, perhaps around the 3.5% mark.
With GDP growth continuing at a respectable pacem inflation very gradually slowing, and the Fed having begun to reduce interest rates, it is surprising that small business owners are as pessimistic as they are. Our sense is that they are overly worried. Now that the election is out of the way small business optimism seems certain to climb.
Stephen Slifer
NumberNomics
Charleston, SC
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