June 11, 2024


Small business optimism rose 0.8 point in May to 90.5 after climbing 1.2 points in April.  While this is the highest level for this series this year, it is still well below the 40-year average so-called breakeven point for this series which is 98.0.

NFIB Chief Economist William Dunkelberg said, “Optimism has been in the dumps since early in 2020. Views about future business conditions are at the worst levels
seen in 50 years. Investment (capital spending) remains anemic, lowering prospects for productivity improvements. The government’s share of GDP has grown as has government employment, but hiring more IRS agents is not going to improve consumer well-being. Unsustainable debt levels, including the national debt, risk destabilizing events in financial markets. And, the election promises to bring major changes in the tax and regulatory environment, regardless of who wins. All of this presents a very uncertain outlook for small
business owners and uncertainty is the enemy of progress.”

Certainly the demand side of the economy continues to expand at a moderate rate.

We expect to see 2.8% GDP growth in the second quarter of this year followed by roughly 2.0% GDP growth in the second half of the year.  Estimates of potential GDP growth today are about 2.0%.  Thus, the economy seems to be growing at respectable pace with no hint of a recession in sight.

The core CPI is expected to slow to 2.9% by yearend which is a bit faster than expected and 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 2025.  The Fed should begin a slow but steady easing pace by December.

With GDP growth continuing at a respectable pacem  inflation very gradually slowing, and the Fed soon beginning to reduce interest rates (even at a slower pace than the markets expected), it is surprising that small business owners are as pessimistic as they are.  Our sense is that they are overly worried.

Stephen Slifer


Charleston, SC