Monday, 24 of June of 2019

Economics. Explained.  

Small Business Optimism

June 11, 2019

Small business optimism climbed 1.5 points in May to 105.0 after having risen 1.7 points in April.  The August level of 108.8  broke the previous record high level of 108.0 set 35 years ago back in July 1983.  So while confidence slipped slightly in the early part of this year it has fallen from a record high level and still remains very lofty.

NFIB President Juanita Duggan said, “Optimism among small business owners has surged back to historically high levels, thanks to strong hiring, investment, and sales.  The small business half of the economy is leading the way, taking advantage of lower taxes and fewer regulations, and reinvesting in their businesses, their employees, and the economy as a whole.”

Chief Economist William Dunkelberg added, ““Small business owners are demonstrating a continued confidence in the strength of the economy and are betting capital spending dollars on it.  This solid investment performance is supporting ongoing improvements in productivity and real wages.”

In our opinion the economy is expected to expand at a reasonably robust 2.6% pace this year.  Specifically, we believe that the cut in the corporate income tax rate, legislation that will allow firms to repatriate corporate earnings currently locked overseas back to the U.S. at a favorable 15.5% rate, and the steady elimination of unnecessary, confusing and overlapping federal regulations will boost investment.  That, in turn, should boost our economic speed limit should from 1.8% or so today to 2.8% within a few years.

After falling 20% late last year the stock market recovered all of the earlier loss and established a new record high level and is currently only about 2% below that new peak level.   Jobs are being created at a brisk pace.  The unemployment rate is well below the full employment threshold.  Mortgage rates have fallen in the past couple of months from 4.9% to 3.8%.  And investment spending remains solid.  We expect GDP growth to be 2.6% this year after having risen 3.0% in 2018.  The core inflation should be relatively stable at 2.3% in 2019 after rising 2.2% in 2018.  The Fed will has pledged to keep rates steady through the end of the year.  Moderate GDP growth, low inflation, and low interest rates should continue to bolster the stock market in the months ahead.

Stephen Slifer


Charleston, SC

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