We saw signs of a rise in sentiment amongst small business owners for April in data released last month, and the positive outlook strengthened further in May, in an encouraging sign for the US economy.
By Peter Martin
Tuesday, June 9, 2015
The National Federation of Small Business (NFIB) reported today that its Small Business Optimism Index rose to 98.3 in May from April’s reading of 96.9. This is a very strong outcome, exceeding the consensus estimate of 97.2 and hitting its highest level since the start of the year.
‘Improved profit trends accounted for over half the Index gain, a rather unusual but welcomed development,’ said Bill Dunkelberg, Chief Economist of the NFIB. He added that ‘The NFIB May survey results confirm that the economy is moving ahead.’
Though economic indicators are not yet showing wide agreement of robust growth in the US economy, the combination of today’s more upbeat assessment of the outlook by business owners with the surge in jobs growth announced on Friday has sparked some concerns that the Fed could go for lift-off as early as September. We’ll get a clearer steer on things with Thursday’s retail sales report, but in the meantime the major US stock indices have been struggling for direction. Prices were little changed in early trading on Tuesday, and shortly after the opening on Wall Street the Dow Jones was up 7 points or 0.04% at 17,773, while the broader measure of the S&P 500 Index climbed just 0.01%.
Globally though growth is soft and it is difficult to see the general stance of monetary policy amongst the major central banks remaining anything other than accommodative for some time. Chinese inflation data released overnight showed prices slackening, suggestive of a loss of momentum in the economy. The Chinese CPI fell 0.2% in May, taking the annual change down to 1.2% from April’s 1.5%. Not only is inflation running well below Beijing’s 3% target, but it is moving in the wrong direction and the warning signs of a lull in consumer demand could well invite more monetary stimulus. Shares in Asia fell overnight, with a 0.7% drop in the CSI 300 (an index that reflects the price of 300 leading stocks from the Chinese Shanghai and Shenzhen exchanges), while stock performance in Japan was even worse, seeing the Nikkei 225 plunge 1.8%.
Eurostat confirmed its earlier first-quarter GDP estimate for the eurozone in a report released today. GDP across the shared economic region grew 0.4% in the first quarter, for a year-over-year change of 1.0%. A major contribution to that growth came from household consumption, with strong performances by the key economies of Germany, France, Italy and Spain. Though there is nothing particularly surprising in this data, given that it is line with the earlier estimate, it does provide confirmation that the eurozone is on a path of recovery.
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